TMI Blog2018 (10) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... d that any amount collected by the Bank cannot be anything but interest, whatever may be the nomenclature, and is chargeable interest for the purpose of Interest Tax Act. "Loans and advances” has been held to be different from discounts and legislature has kept in mind the difference between the two and it is clear that the right to charge for overdue interest by the assessee banks did not arise on account of any delay in repayment of any loan or advance made by the said banks and this right arose on account of default in payment of amounts due under a discounted bill of exchange. It was held that a subject can be brought to tax only by a clear statutory provision in that behalf and interest is chargeable to tax under Interest Tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified in holding that the provisions of Section 2(7) of the Act would be attracted to the facts of the case in view of the wrong assumption of facts on the amounts received as recorded in para 5 of the impugned order and in the process whether the Appellate Tribunal was justified in confirming the action of the respondent in expanding the scope of the 'chargeable interest' as defined? (iii) Whether on the facts and in the circumstances of the case the Appellate Tribunal was justified in upholding the levy of interest tax on the penal/default interest collected even though the First Appellate Order was based on another First Appellate Order rendered under similar circumstances accepted by the Revenue especially the appeals pref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of interest on loans and advances and thus, chargeable to interest tax within the meaning of Sections 2(1) and 5 of the Interest Tax Act. Aggrieved by such order, the assessee preferred appeal before the Commissioner of Income-tax (Appeals)-V (CIT(A)). By order dated 22.01.2003, the CIT(A) followed the decision in the case of Shenoy Nagar Saswatha Nidhi Limited in ITA Nos.39 and 40/1999-2000-CIT(Appeals)-IV dated 11.02.2000 and deleted the addition made by the Assessing Officer for both the assessment years. 7.In the said decision, in the case of Shenoy Nagar Saswatha Nidhi Limited (supra), it was held that Interest Tax Act authorities levy tax on interest on loans and advances and such other items specified in Section 2(7) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd advances made in India. It includes two other categories and excludes two other categories. But, in these appeals, we are not constrained about such inclusion or exclusion, as it is the case of the Revenue that the charges collected by the assessee would fall within the inclusive definition of interest under Section 2(7) of the Interest Tax Act. 11.The case of the Revenue is pitched on the sole point that whatever that has been collected is on loans and advances extended by the assessee and in whatever name it might have been collected, it would fall within the definition of interest under Section 2(7) of the Interest Tax Act. 12.More or less identical question came up for consideration before a Division Bench of this Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t charges which is an amount given as a premium, would not attract the provisions of the Interest-tax act. The Tribunal is therefore correct in excluding additional discount charges from the chargeable interest under the Interest-tax Act. 13.In the case of Commissioner of Income-tax vs. Bank of Rajasthan Ltd. [2010] 323 ITR 524 (Rajasthan), it was held that interest or penal interest charged by the assessee on the delayed payment of instalments by the depositors of the recurring deposit accounts, is not exigible to tax under the provisions of the Interest-tax Act, 1974. 14.Similar view was taken in the case of Commissioner of Income-tax vs. State Bank of Indore reported in [1988] 172 ITR 24 (MP) wherein the Court held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and legislature has kept in mind the difference between the two and it is clear that the right to charge for overdue interest by the assessee banks did not arise on account of any delay in repayment of any loan or advance made by the said banks and this right arose on account of default in payment of amounts due under a discounted bill of exchange. Further, it was held that a subject can be brought to tax only by a clear statutory provision in that behalf and interest is chargeable to tax under Interest Tax Act only if it arises directly from a loan or advance. This finding was explained by stating that it is clear from the use of the word on in Section 2(7) of the Interest Tax Act that interest payable on a discounted bill of exchang ..... X X X X Extracts X X X X X X X X Extracts X X X X
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