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TMI Blog2018 (10) TMI 369X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and in the circumstances of the case, the Tribunal was right in holding that additional finance charges are eligible to interest tax? 2. Whether on the facts and in the circumstances of the case, the Tribunal was right in not appreciating that additional finance charges are not in the nature of interest on loans and advances as defined under Section 2(7) of the Interest Tax Act?" 2. Learned counsel for appearing on either side agree that the above referred substantial questions of law have been answered in favour of the assessee by the Supreme Count in the judgment reported in (2016) 383 ITR 0244 (SC). This Court had considered similar issue in T.C.A.No.1148 and 1149 of 2008 and passed the following order on 10.09.2018. "9.T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 case of Commissioner of Income Tax vs. Cholamandalam Investment & Finance Co. Ltd. reported in (2008) 296 ITR 0601 wherein, the substantial question of law, which was framed for consideration, was whether the Tribunal was right in excluding additional discount charges from the chargeable interest under the Interest Tax Act. The Division Bench, after referring to the decision in the case of Commissioner of Income-tax vs. State Bank of Travancore reported in (1997) 228 ITR 40 (Ker), held that interest on loans and advances and the additional discount charges w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Tribunal was not right in holding that the amounts charged by the assessee for delayed payment of bills of entry were in the nature of interest on advances and exigible to tax under the Act. 15.The High Court of Karnataka, in the case of State Bank of Mysore vs. Commissioner of Income-tax reported in (1989) 175 ITR 607 (Kar.), held that interest is the damages or compensation for delayed payment of money due and therefore, the expression 'compensation' in Section 32 of the Negotiable Instruments Act, will include interest paid by way of damages or compensation for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 exchange cannot be equated with interest payable "on" a loan or advance. With the above finding, the Court held that the reasoning contained in the judgments of the High Court, which differ from the High Court of Karnataka is correct. The Court then proceeded to deal with the expression "interest" as defined under the Income Tax Act in Section 2(28A) and held as follows:- "18.It will be noticed that this definition is much wider than that contained in Section 2(7) of the Interest Tax Act, 1974. The expression "payable in any manner in respect of any moneys borrowed" is an expression of considera ..... X X X X Extracts X X X X X X X X Extracts X X X X
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