Commissioner of Income-tax v. Ratnakar Bank Ltd
[Citation -2008-LL-1013-6]

Citation 2008-LL-1013-6
Appellant Name Commissioner of Income-tax
Respondent Name Ratnakar Bank Ltd.
Court SUPREME COURT
Relevant Act Income-tax
Date of Order 13/10/2008
Judgment View Judgment
Keyword Tags interest on securities • government securities • interest chargeable • interest earned • interest-tax
Bot Summary: The challenge in these appeals is to the judgment of final order passed by the Bombay High Court in a group of appeals filed by the Revenue under section 260A of the Income-tax Act, 1961, read with section 24 of the Interest-tax Act, 1974. The question involved was whether interest earned by the assessee-bank on Government securities was liable to be assessed under section 2(7) of the Interest Act The Income-tax Appellate Tribunal held that it was not chargeable. The High Court by the impugned judgment upheld the view of the Tribunal. The Revenue filed the present appeals against the judgment of the High Court. Learned counsel for the respondent-assessee-bank on the other hand supported the judgment of the Tribunal as upheld by the High Court. These aspects have been discussed in detail in two decisions of the Bombay High Court, namely, Discount and Finance House of India Ltd. v. S. K. Bhardwaj, CIT reported in MANU/MH/0628/2002, as also in another decision of the Bombay High Court reported in MANU/MH/0629/2002 in the case of CIT v. United Western Bank Ltd. It is not in dispute that the Revenue has accepted the aforestated two judgments of the Bombay High Court. Learned counsel for the appellant submitted that this court s decision related to the interest on Government securities.


JUDGMENT judgment of court was delivered by Dr. Arijit Pasayat J. Leave granted. challenge in these appeals is to judgment of final order passed by Bombay High Court in group of appeals filed by Revenue under section 260A of Income-tax Act, 1961 (in short Act ), read with section 24 of Interest-tax Act, 1974 (in short Interest Act ). question involved was whether interest earned by assessee-bank on Government securities was liable to be assessed under section 2(7) of Interest Act? Income-tax Appellate Tribunal (in short Tribunal ) held that it was not chargeable. High Court by impugned judgment upheld view of Tribunal. Revenue filed present appeals against judgment of High Court. It was submitted by learned counsel for appellant that Tribunal and High Court were not justified in holding that loans and advances do not include interest on securities, bonds, debentures and, therefore, not liable to tax under provisions of Interest Act. It is submitted that interest on securities falls within meaning of interest chargeable to tax as defined under section 2(7) of Interest Act. Learned counsel for respondent-assessee-bank on other hand supported judgment of Tribunal as upheld by High Court. similar question came up for consideration before this court in CIT v. Corporation Bank [2008] 166 Taxman 388 (SC). This court held as follows: [2007] 295 ITR 193 (SC). Leave granted in special leave petitions. short point which arises in this batch of civil appeals is whether interest earned by assessees-banks on dated Government securities was liable to be assessed under section 2(7) read with section 4 of Interest-tax Act, 1974. In our view, there is basic difference between loans and advances on one hand and investments/securities on other. This difference is indicated in provisions of Income-tax Act, Companies Act as well as Banking Regulation Act. These aspects have been discussed in detail in two decisions of Bombay High Court, namely, Discount and Finance House of India Ltd. v. S. K. Bhardwaj, CIT reported in MANU/MH/0628/2002, as also in another decision of Bombay High Court reported in MANU/MH/0629/2002 in case of CIT v. United Western Bank Ltd. It is not in dispute that Revenue has accepted aforestated two judgments of Bombay High Court. We are in agreement with view expressed by Bombay High Court. For aforestated reasons there is no merit in civil appeals filed by Department. same are dismissed. No order as to costs. Learned counsel for appellant submitted that this court s decision related to interest on Government securities. Learned counsel for assessee submitted that in instant case interest earned was on Government securities only. stand is denied by learned counsel for appellant. Let Tribunal examine factual position as to whether interest involved in present case is on Government securities. If that be so, ratio of decision in Corporation Bank s case will apply to facts of present case and if interest earned is not solely on Government securities, ratio of decision will not apply. appeals are disposed of accordingly. [2007] 295 ITR 193 (SC). [2003] 259 ITR 295 (Bom). [2003] 259 ITR 312 (Bom). *** Commissioner of Income-tax v. Ratnakar Bank Ltd
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