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2005 (9) TMI 55 - HC - Income TaxInterest Tax Act, 1974 - Charge of Tax - (a) Whether, Tribunal is right in holding that the reopening of assessment under section 10 of the Interest-tax Act is bad in law? - (b) Whether, Tribunal is right in law in holding that interest on securities does not form part of chargeable interest for the purpose of interest-tax? - We add that interpretation of statute particularly, fiscal statute has to be strict and nothing can be read into the statute resulting in destroying the legislative intention in terms of the well-settled principles of law. The law of interpretation of statute also would support the assessees-bank two questions referred to above in this reference are answered in the affirmative i.e., in favour of the banks and against the Revenue
Issues Involved:
1. Reopening of assessment under section 10 of the Interest-tax Act. 2. Taxability of interest on securities under the Interest-tax Act. Detailed Analysis: Re: Question No. 1 - Reopening of Assessment under Section 10 of the Interest-tax Act: The first issue revolves around whether the reopening of assessments under section 10 of the Interest-tax Act is valid. Section 10 allows the Assessing Officer to reopen an assessment if there is reason to believe that chargeable interest has escaped assessment due to the assessee's omission or failure to disclose fully and truly all material facts, or if there is new information in possession. The Revenue argued that a notification dated September 11, 1995, constituted "information" justifying the reopening. However, the Tribunal found that the reasons for reopening, as recorded by the Assessing Officer, did not reference this notification. Instead, the reasons cited were the omission of interest on securities from chargeable interest, based on the Finance (No. 2) Act, 1991, which had deleted the specific exclusion of interest on securities from the definition of chargeable interest. The court noted that the Supreme Court in Andhra Bank Ltd. v. CIT had ruled that reopening is not valid without new information from an extraneous source, and mere change of opinion does not justify reopening. The Tribunal's conclusion that there was no new information and only a change of opinion was upheld, making the reopening invalid. Re: Question No. 2 - Taxability of Interest on Securities: The second issue concerns whether interest on securities is taxable under the Interest-tax Act. The Tribunal ruled that only interest on loans and advances is chargeable to tax, not interest on securities. The Revenue contended that the amended definition of "interest" in section 2(7) of the Interest-tax Act, which no longer specifically excluded interest on securities, implied its inclusion. The court examined the definition of "interest" before and after the amendment and noted that securities are distinct from loans and advances. Interest on loans and advances is paid, whereas interest on securities is received. The Tribunal's interpretation that the legislative intent was to exclude interest on securities from chargeable interest was supported by various judgments, including CIT v. Lakshmi Vilas Bank Ltd., Discount and Finance House of India Ltd. v. S.K. Bhardwaj, CIT v. United Western Bank Ltd., and CIT v. Sahara India Savings and Investment Corporation Ltd. The court concluded that the deletion of the exclusionary clause in the definition of "interest" did not affect the main section 2(7), which was intended to cover only interest on loans and advances. The interpretation of fiscal statutes must be strict, and nothing should be read into the statute that would alter the legislative intent. Conclusion: Both questions were answered in favor of the assessees (banks) and against the Revenue. The reopening of assessments under section 10 was deemed invalid due to the lack of new information, and interest on securities was ruled not taxable under the Interest-tax Act. The judgment emphasizes the importance of strict interpretation of fiscal statutes and adherence to legislative intent. No costs were awarded.
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