9911796707
TMI Blog2004 (6) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... late Tribunal was justified in holding that the export subsidy granted to the assessee by the Reserve Bank of India does not lose the character of interest though it is not paid by the borrower and the same is, therefore, includible in chargeable interest under the Interest-tax Act, 1974?" The assessee is a nationalised bank. It is a subsidiary of the State Bank of India. The assessee-bank in its day-to-day banking activity is required to advance credit to several exporters engaged in export business on lesser rate of interest. The Reserve Bank of India then on their part pay the amount to the assessee to the extent of loss incurred by the assessee due to extending credit to the exporter at a lesser rate of interest. This amount paid by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk of India for utilisation in any export activity as an exporter, the same cannot be regarded or characterised as an export subsidy so as to take out the same from the taxing net. The Assessing Officer then held that the amount received by the assessee is essentially in the nature of interest as defined under section 2(7) of the Interest-tax Act and, hence, liable to be included in the total income of the assessee for paying tax. The assessee felt aggrieved by the finding of the Assessing Officer, referred to supra, and filed an appeal to the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) while dismissing the appeal upheld the finding of the Assessing Officer. He too was of the view that since the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his court should follow the reasoning of the Karnataka High Court and answer the reference on the same lines. Having heard learned counsel for the parties and having perused the record of the case, we are of the view that the question referred has to be answered against the assessee and in favour of the Revenue. At the outset, we may take note of the fact as brought to our notice by learned counsel for the Revenue that this very issue which is a subject matter of this reference came up for consideration before the Karnataka High Court in the case of Vijaya Bank [1989] 175 ITR 611. While answering the same against the assessee their Lordships held as follows: "In the course of its banking activities, the assessee advanced money on export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irectly paid the subsidy. The subsidy was paid towards interest and, therefore, the payment made by the Reserve Bank of India to the assessee was nothing but interest under section 2(7) of the Interest-tax Act, 1974. Moreover, consideration could flow from a person other than the borrower (in this case, the Reserve Bank of India) and the payment, therefore, did not lose the character of interest. Therefore, the subsidy could be included in the chargeable interest under section 5 of the Interest-tax Act, 1974." In our considered view, we find no reason much less cogent one to differ from the view so taken by the Karnataka High Court, referred to supra. It is much more so when learned counsel for the assessee could not bring to our notice an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned does not arise. In the circumstances, if the taxing authorities regarded the amount in question to be in the nature of an interest as defined under section 2(7) of the Interest-tax Act, 1974, then, no flaw can be found in such approach. The submission of learned counsel for the assessee was that the amount in question cannot be regarded as an interest within the meaning of section 2(7) of the Act. We do not agree. Indeed, this submission was dealt with in the case of Vijaya Bank [1989] 175 ITR 611 (Karn) and repelled as referred to supra. We concur with the finding so recorded and hence, do not consider it necessary to again repeat the same. In view of the aforesaid discussion, we answer the question referred against the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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