TMI Blog2006 (2) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... ssues in these appeals relates to the assessee's contention that it is not a financial institution to be roped in for the liability under the Interest Tax Act. The learned counsel for the assessee reiterated the stand that was taken before the learned CIT(A). Drawing our attention to pages 4 and 5 of the order of the CIT(A) in the case of Walchand Hindustan Ltd. (Int. T.A. No. 65/Mum./96) for assessment year 1992-93, it was pointed out that nearly 93 per cent of the income is by way of dividend, which was received from investment made in the group companies. They were all part of capital assets and not held as part of business assets. He also drew our attention to the discussions at page 5 of the impugned order that nearly 95 per cent of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 which amended the Interest Tax Act, 1974, extended the scope of Interest Tax Act to some selected financial institutions also. In the Finance Act, 1983, the rate of tax was reduced to three and half per cent. The Finance Act, 1985, suspended the operation of the Act from the assessment year 1986-87. As an anti-inflationary measure, the Finance (No. 2) Act, 1991, reintroduced the Act with effect from 1-10-1991. 4. The tax is levied on the gross interest income of 'credit institutions', i.e., bank, including co-operative societies engaged in the business of banking, public financial institutions, State financial corporations and other financial companies. The term 'financial company' is defined in section 2(5B) of the Act to mean a hire-p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , stock, bonds, debentures, debenture stock, or securities issued by the Government or a local authority, or other marketable securities of a like nature; (iii) a housing finance company, that is to say, a company which carries on, as its principal business, the business of financing of acquisition or construction of houses, including acquisition or development of land in connection therewith; (iv) a loan company, that is to say, a company [not being a company referred to in sub-clauses (i) to (iii)] which carries on, as it principal business, the business of providing finance, whether by making loans or advances or otherwise; (v) a mutual benefit finance company, that is to say, a company which carries on, as its principal business, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, is also included within the scope of financial company. A loan company, whose principal business is providing finance, is also treated as a financial company. Likewise, nidhi or mutual benefit society is also treated as financial company. A residuary non-banking company doing activities of the nature described above is also to be included within the fold of financial company. The basic thread running in all these institutions is their principal business must be dealing with what is known as finance. In the case of an investment company, the acquisition of shares is one spicy of the transaction. It can be called a principal business only when it deals in business of acquisition of shares, stocks, bonds and such other marketable securities ..... X X X X Extracts X X X X X X X X Extracts X X X X
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