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TMI Blog1985 (9) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to exemption under the following two Government orders passed under the authority conferred on the Government of India under section 28 of the Act: (1) Notification No. S.O. 2214 dated 15-5-1976, (2) Notification No. S.O. 1369 dated 28-6-1976. Copy of the first notification is furnished at page 8 of the paper compilation filed by the assessee-bank before this Tribunal. 3. In order to understand the real matter in controversy the following facts are essential to be borne in mind. One of the measures taken by the Government of India to augment agricultural production and to help provide small/marginal farmers with necessary credit facilities during agricultural operations was to set up All India Rural Credit Review Committee (the Committee) one of whose functions is to suggest to the Reserve Bank of India (RBI) ways and mean as to how best rural credit can be provided through Central Banks. After duly taking into consideration the suggestions and resolutions of the Committee the RBI framed schemes which they felt appropriate to provide rural credit by granting the said credit to the Central Banks through Apex Banks. The scheme, thus, in vogue up to cooperative year 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agricultural loans and advances made to the Central Banks. 6. Then the RBI had the occasion to go into as to how under the working of the present scheme, already stated above, there was justification for the Apex Banks to complain about the double disadvantage with which they were faced especially for the period from 1-4-1974 to 30-6-1975. The Apex Banks explained the position obtaining after the Act was enacted vis-a-vis the scheme under which they were obliged to grant rebate to the Central Banks. It was explained that if the said scheme which was in vogue was to continue : (i) the Apex Banks are liable to pay interest-tax on the entire interest including one and a half per cent which they were expected to rebate and pass on to the Central Banks, and (ii) subsequently, they lose one and a half per cent interest which they pass on to Central Banks. So, virtually the Apex Banks have to pay interest-tax on interest income which never remained or accrued as their income but which sooner or later passes on as rebate to the Central Banks. Having found the abovestated causes of complaint made by the Apex Banks genuine, two types of measures were sought to be taken by the RBI to provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... day of April, 1975 and ending with the 30th day of June, 1975. Explanation: In this notification, the expression 'Central Co-operative Bank' and 'State Co-operative Bank' shall have the same meanings assigned to them in the Reserve Bank of India Act, 1934 (2 of 1934)." Section 28 deals with power to exempt which is as follows: "Where the Central Government is of the opinion that it is necessary or expedient so to do either in public interest or having regard to the peculiar circumstances of the case, it may, by notification, and subject to conditions, if any, as may be specified in the notification, exempt any Scheduled Bank or any class of Scheduled Banks from the levy of interest tax: Provided that no such exemption shall be made except on the recommendation of the Reserve Bank of India." 8. In the assessment year 1976-77 for which the previous year ended by 30-6-1975 the total interest income received by the assessee-bank which is an Apex Bank was Rs. 2,45,56,120. Out of it, Rs. 2,01,20,550 represents interest on borrowings of the Central Banks from the assessee-Apex Bank. According to the assessee the whole amount of Rs. 2,01,20,550 represents exempted interest being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the revenue before the learned Commissioner (Appeals) that the phrase 'which qualifies for rebate' describes interest and, therefore, only the amount of interest which has been allowed by the assessee-Apex Bank as a rebate to the Central Co-operative Banks is entitled to exemption. The learned Commissioner (Appeals) in his impugned order dated 5-3-1983 held that the exemption given by the notification is not in respect of whole interest on borrowings from the Central Co-operative Banks but, on the other hand, the exemption is in respect of interest on the borrowings from the Apex Banks by the Central Co-operative Banks on which rebate is allowed by the former to the latter and in this view of the matter he dismissed the appeal filed before him. 11. As against the said order of the Commissioner (Appeals) dated 5-3-1983 Interest-tax Appeal No. 2 (Coch.) of 1983 was filed and as against the revisionary orders dated 27-12-1982 passed by the Commissioner (Appeals), Interest-tax Appeal No. 1 (Coch.) of 1983 was filed. However, common grounds were raised in both these appeals and so both these appeals can be disposed of conveniently by a common order. 12. In these appeals we ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the Apex Bank would pass on to the State Co-operative Banks from out of the total interest on the borrowings towards seasonal agricultural loans. Shri Venkatachalam Aiyer, the learned counsel for the assessee, vehemently contended that the Central Government made the notification, no doubt, on the recommendation of the RBI. The true meaning of the notification cannot be explained authoritatively by the RBI. The authority of the RBI stops with only recommending the cases of exemption under section 28 and does not go beyond it. The true purport and intent of the notification should be derived by a valid construction put upon the wording of the notification and we should not depend upon the clarification given by the RBI about the intendment of the notification. When the intendment and the wording of the notification come into conflict with each other then the wording of the notification should prevail over the intendment. The words 'which qualify for rebate' are descriptive of the words 'on the borrowings' and do not qualify the word 'interest'. Therefore, according to him, the whole interest on the borrowings made by the Central Banks from the Apex Bank towards seasonal agricultur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Apex Banks pass on to the Central Banks on the borrowings towards seasonal agricultural loans and it is this letter addressed to the CBDT by the RBI which acted as a provocation for the Government of India to come out with the two notifications already noted above. Therefore, we should read the notifications only with due regard to the circumstances under which they were made by the Government of India. They cannot be read either in isolation or torn out of context or the set up in which they were made. If we keep in mind all the circumstances which led the Government of India to promulgate the notifications dated 15-5-1976 and 28-6-1976 and then begin to interpret the notifications, our conclusion is inescapable. It is only the recommendation of the RBI which was translated into the notifications. If that is so, we have to hold that only the rebate-interest which the assessee and other Apex Banks would pass on to the Central Banks on seasonal agricultural loans, which would be exempt from provisions of the Act and not the whole interest on the whole borrowings made by the Central Banks from the Apex Banks. The power to exempt under section 28 is a power to exempt interest-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r clause should be looked at as a whole and a proper meaning should be arrived at." If the sentence in a notification has to be read as a whole and if we have to give proper and real meaning to all the words occurring in the sentence then the interpretation which we prefer to put against the sentence is the only proper one. In CIT v. M.K. Stremann [1965] 56 ITR 62 (SC) it is held that we cannot ascribe tautology or superfluity to the Legislature but should rather be at an outset inclined to support every word intended to have some effect or be of some use. Last but not the least, section 28 as well as the notification made thereunder dated 15-5-1976 are provisions regarding exemption granted from the Act and so they should be construed strictly. This proposition is supported by the following decisions: CIT v. Satellite Engg. Ltd. [1982] 136 ITR 607 (Guj.), CIT v. Sutna Stone Lime Co. Ltd. [1982] 138 ITR 37 (Cal.), CIT v. Janardan Subudhi [1981] 131 ITR 287 (Ori.) and R. Natarajan v. CED [1982] 138 ITR 178 (Mad.). In view of the above ratio, permitting only strict construction when we are interpreting exemption provision of a statute, a benevolent interpretation of the statute ..... X X X X Extracts X X X X X X X X Extracts X X X X
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