2018 (10) TMI 501 - AT - Income Tax

Chargeability of interest tax on interest derived from various sources - Held that - Additions of ₹ 20 Lakhs is not sustainable in law. Similarly, interest received from another credit institution amounting to ₹ 4.19 Lakhs is also not susceptible to interest tax in view of the exclusion provided under s.5 of the Act for which the CIT(A) has also concurred with the assessee. This leaves us with interest received from Tata Chemicals Ltd. amounting to ₹ 9,83,219/- and from Alpa Marketing Enterprise amounting to ₹ 21,680/-. In view of the concession granted on behalf of the assessee owing to smallness of the amount, we hold the same to be susceptible to the interest tax. Consequently, the assessee gets relief on account interest income derived from investment in debentures and interest income received from other credit institution aggregating to ₹ 24,19,178/- and other additions are not interfered with.

Summary

Issues:
Applicability of interest tax on interest income declared by the assessee company for different assessment years.

Analysis:
1. The appeals raised the grievance of interest tax applicability on interest income declared by the assessee company. All appeals were heard together due to similar issues.
2. The lead case for adjudication was Int.T.A. No.1/Ahd/2017 concerning AY 1995-96, where the AR challenged the chargeability of interest income under s.8(3) r.w.s. 10 of the Interest Tax Act, 1974.
3. The AR contended that interest income was predominantly from the company's own funds, not loans or advances, thus not subject to interest tax.
4. The AR highlighted interest income details from various sources, emphasizing that certain amounts were not susceptible to interest tax based on legal definitions and precedents.
5. The Tribunal considered the arguments, granting relief on interest income from certain sources based on exclusions and concessions, while upholding tax liability on other amounts.
6. The decision was based on legal interpretations, including the definition of chargeable interest and exclusions under the Act.
7. Relief was granted in part for each appeal, considering specific details of interest income from different sources and legal precedents.
8. The judgment was pronounced on 08/10/2018, partially allowing all three appeals of the assessee.