ORDER SHEET ITA No.736 of 2004 IN HIGH COURT AT CALCUTTA Special Jurisdiction (Income Tax) ORIGINAL SIDE J. THOMAS TRADING & INVESTMENTS PVT. LTD Versus COMMISSIONER I.TAX, W.B. - III,KOLKATA BEFORE: Hon'ble JUSTICE SOUMITRA PAL Hon'ble JUSTICE DEBANGSU BASAK Date : 16th September, 2014. Appearance: Ms. Mamata Bhargav, Adv. Court : appeal was admitted on following questions: 1) Whether on true and proper interpretation of provisions of Section 2(7) and 5 of Interest Tax Act, 1974, amount charged by Appellant for arranging bill discounting facility with Bank for its clients amounted to interest on any loan or advance chargeable under provisions of Act and Tribunal was justified in law in rejecting Appellant s said contention? 2) Whether on true and proper interpretation of Section 2(5B) (iv) of Act, bill discounting facility arranged by Appellant with Bank for its clients constituted business of providing finance within meaning of said provision and purported findings of Tribunal rejecting Appellant s contentions in that behalf are arbitrary, unreasonable and perverse? 3) Whether and in any event, arrangement of bill discounting facility with Bank for its clients constituted principal business of Appellant and purported findings of Tribunal 2 rejecting Appellant s contentions in that behalf are arbitrary, unreasonable and perverse? None appears on behalf of appellant when matter is taken up for hearing. Heard Ms. Mamata Bhargav, learned Advocate for respondent. We find that CIT(A) had inter alia held as follows: I have considered submissions of appellant. On consideration of nature of transaction which took place between appellant company, Bank and third party, as discussed above, it is evident that Bank sanctioned limit to appellant company for opening Bill Discounting facility against sight bills. limit was to be utilized by appellant company to finance sales made by third party through appellant company. Bank discounted bills of third party on instruction of appellant company and debited account of appellant company by bill amount net off discounting charges @ 21%. said sum, in form of Bankers Cheque / Demand Draft was handed over by appellant company to third party as advance or loan on interest payable @ 23% / @24% of aforesaid advance. repayment of said advance along with interest etc. was credited to Bank Account of appellant company. difference between repaid amount and amount of Bill discounted was shown in Profit & Loss Account as interest received. close look at nature of aforesaid transaction between appellant company and third party would reveal that in sum and substance said transaction is in nature of advance of loans / advance to third party whose bills were discounted by Bank. As such, benefit accruing to appellant on these transactions is in nature of interest within meaning of Section 2(7) of Interest Tax Act. Furthermore, Clause [IV] of Section 2[5B] referring to loan company to mean company which carries on, as it s 3 principal business, business of providing finance, whether by making loans or advance or otherwise. It means that loan company is company which provided finance by way of loan or advance or otherwise. word otherwise has to be given wider meaning so as to include within it s ambit even those transactions of loans or advance which are in nature of providing finance even though, assessee may have acted as intermediary, as in this case. In view of above, I agree with Assessing Officer that appellant company is credit institution in view of provision of section 2[5B][IV] of Interest Tax Act and that income shown under head interest in Profit & Loss Account, claimed by appellant to be in nature of service charge is in fact interest received within meaning of Section 2[7] of Interest Tax Act. Therefore, I find no justification to intervene in order of Assessing Officer, in result these three appeals are dismissed. Tribunal, while upholding order of CIT, had found as under: After hearing rival parties and on our careful perusal of facts, we are inclined to hold that presentation of amounts on Balance Sheet and P & L Account by assessee may be to hold view that principal business of assessee is not that of providing loans and advances but bills discounted on basis of credit facility from Hongkong Bank which was guaranteed by holding company of assessee clearly indicates that bill discounting facility enjoyed by third parties was in nature of providing finance to other companies and, therefore, was attracting provisions of section 2(5B) (IV) of Interest Tax Act, 1974. arguments of Ld. Counsel that principal business was not that of providing finance has been determined by contention of assessee himself on fact that without having guarantee of holding company assessee company would not have proceeded to discount bills raised on bank who parted with 4 finance on basis of assessee retaining 2% on difference amount as noted by ld. CIT (A). It was arrangement with bank and holding company and, therefore, even Apex Court s decision in case of Kedarnath Jute Manufacturing Co. 82 ITR 363 cannot come to its rescue. Therefore, we are wholly inclined to uphold contention of ld. CIT (A) on facts and circumstances as brought out by authorities below and have no hesitation in dismissing appeals filed by assessee. In our view, questions raised have been elaborately discussed by CIT(A) and by learned Tribunal. Hence, impugned order of Tribunal does not require any interference. Therefore, appeal is dismissed. (SOUMITRA PAL, J.) (DEBANGSU BASAK, J.) cs J. Thomas Trading & Investments Pvt. Ltd v. Commissioner I.Tax, W.B. - III, Kolkata