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TMI Blog2001 (8) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... and debentures was specifically exempt and excluded but in the revised version of the Act effective from 1st Oct., 1991, similar exemption was not made in the Act. From this he concluded that interest on securities, bonds and debentures was also liable to taxation along with the interest on loans and advances. In view of these the AO added interest on securities, bonds, and debentures amounting to Rs. 78,98,98,235. 4. Aggrieved, the assessee preferred first appeal before the learned CIT(A) who upheld the AO s order. He observed that the AO s finding was correct. The AO also relied on CBDT Instruction No. 1923 issued to the Departmental officers on the subject whether interest on debentures, bonds and securities, etc., were taxable under the Interest-tax Act. In this instruction, the CBDT instructed that interest on securities, bonds and debentures was exigible to interest-tax. 5. Aggrieved, further the assessee has come up in second appeal before this Tribunal. Mrs. Shashi Kapila, advocate appearing for the assessee, submitted that the AO and the learned CIT(A) were not justified in charging interest-tax on the interest earned on securities, bonds and debentures. She referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intention to lay the burden upon him. The subject could not be taxed unless he came under the provisions of law. There was no room for taxing the subject on presumption or intendment. 7. The learned counsel further submitted that the provisions of s. 26C of the Act provided for passing on the incidence of the tax to the borrower and accordingly it made it lawful to increase the rate of interest to the extent the credit institution was liable to pay interest-tax on interest on loans taken prior to1st Oct., 1992. She stated that in case of securities, bonds, debentures such passing on of the incidence of interest-tax was not possible and on this ground also interest on securities, bonds and debentures had to be treated daily (sic) but from interest on loans and advances for the purpose of Interest-tax Act. In this connection, she referred to the Finance Minister s speech while introducing the revised Interest-tax Act. She also referred to RBI Circular. Ref. DBOD No. BPBC 20/C. 469(1)-91, dt.2nd Sept., 1991. 8. The learned counsel further submitted that the learned CIT(A) was not justified in upholding the AO s order in view of the CBDT Instruction No. 1923. She added that the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), Delhi High Court decision in Hidrive Finance Ltd. vs. Appropriate Authority Ors. (2001) 165 CTR (Del) 90 : (2001) 249 ITR 34 (Del), Calcutta High Court decision in CIT vs. Sijua (Jharriah) Electric Supply Co. Ltd. (1984) 145 ITR 740 (Cal), Madras High Court decision in CIT vs. Madurai District Central Co-operative Bank Ltd. (1984) 42 CTR (Mad) 27 : (1984) 148 ITR 196 (Mad) and 1 article in 250 ITR 1 Journal portion. He also submitted that the decision in (1972) 83 ITR 335 (SC) relied upon by the assessee was not relevant in the case. 11. In reply the learned counsel for the assessee submitted that the dispute in the UTI s case was different from the dispute in the present case but certain observations of the Bombay High Court regarding passing of the burden of the interest-tax to the borrower was supportive of the assessee s stand in the present case. 12. We have considered the rival submissions and the materials on the file. We are of the view that interest on securities, bonds and debentures was not covered under s. 2(7) of the Interest-tax Act. Sec. 2(7) of the Act reads as under: " Interest means interest on loans and advances made in India and includes: (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words or expression used in the Interest-tax Act but defined in the IT Act shall have the meaning respectively assigned to them in the IT Act. Sub-s. (28A) of s. 2 of the IT Act defines interest as interest means: "Interest means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and include any services fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised." 13. Sub-s. (28B) of s. 2 of the IT Act defines interest on securities as under: "'Interest on securities' means: (i) interest on any security of the Central Government or a State Government. (ii) interest on debentures or other securities for money issued by or on behalf of a local authority or a company or a corporation established by a Central, State or Provinicial Act." From the above it is clear that interest on debentures is nothing but interest on securities under the IT Act and hence the same is different from interest on loans and advances. Accordingly, interest on securities, bonds and debentures cannot be treated as part of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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