9911796707
TMI Blog2018 (10) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... t, "the Tribunal"), Chennai dated 27.07.2007 in Int.Tax.A.Nos.78 and 79/Mds/2003 for the assessment years 1999-2000 and 2000-01 respectively. 2.The above appeals have been admitted, by order dated 13.08.2008, on the following substantial questions of law:- "(i) whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified and correct in law in upholding the levy of interest tax on the penal/default interest collected even though the charging provisions of the Act envisaged such levy on the loans and advances only (ii) Whether the Appellate Tribunal was justified 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest (penal interest) has the nature of compensation received from borrowers, who default on repayments within the due dates and therefore, it is out of the purview of chargeable interest as defined in the Interest Tax Act, 1974. 6.The Assessing Officer did not accept the stand taken by the assessee and held that any compensation received by the lender from the borrower, whatever name it is given, has the character of interest on loans or advances and accordingly, completed the assessment holding that the default interest (penal interest), received by the assessee, has the nature 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 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " means interest on loans and advances made in India and includes (a) commitment charges on unutilised portion of any credit sanctioned for being availed of in India; and (b) discount on promissory notes and bills of exchange drawn or made in India, but does not include- (i) interest referred to in sub-section (1B) of Section 42 of the Reserve Bank of India Act, 1934 (2 of 1934); (ii) discount on treasury bills;" 10.In terms of the "definition" of interest as defined in Section 2(7) of the Interest Tax Act, it means interest on loans and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... character of an overdue bill is wholly distinct from loans and advances and the interest on the loans and advances alone is taxable under the Interest-tax Act and the character of an overdue bill is not synonymous with loans and advances and therefore, the interest on overdue bills is to be excluded from chargeable interest under the Interesttax act. 4. Applying the above ratio to the facts of the case, we hold that the Interest-tax Act is attracted only in respect of interest on loans and advances and the additional discount 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in [2016] 383 ITR 244 (SC). The Hon'ble Supreme Court held that the view of the High Court of Karnataka in the case of State Bank of Mysore (supra) is directly in conflict with the decision of the Hon'ble Supreme Court in the case of Commissioner of Income-tax vs. Sahara India Savings & Investment Corpn. Ltd. [2009] 17 SCC 43 and therefore, held that a contrary view cannot be countenanced. 17.It was further pointed out that "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 2(7) which, we have already seen, connotes a direct arising of payment of interest out of a loan or advance. And thirdly, "any moneys borrowed" must be contrasted with "loan or advances". The former expression would certainly bring within its ken moneys borrowed by means other than by way of loans or advances. We therefore conclude that the Interest Tax act, unlike the Income Tax Act, has focused only on a very narrow taxable event which does not include within its ken interest payable on default in payment of amounts due under a discounted bill of exchange." 18.In the light of the above referred decisions, the order passed by the Tribunal does not lay down correct legal position and accordingly, the same calls for interference. 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
