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TMI Blog1989 (5) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... hat interest paid by the assessee to Agricultural Refinance & Development Corporation and Industrial Development Bank of India amounting to Rs. 8,65,362 should be taken into account in determining the chargeable interest. 3. For the assessment year 1982-83, corresponding to the previous year ended 31-12-1981, the amount in dispute is Rs. 17,75,019. The CIT (Appeals) agreed with the IAC (Assessment) that there is no provision for deducting the interest paid by the assessee in computing the chargeable interest and that it could not be said that the interest paid by the assessee amounted to diversion of income by overriding title. Therefore, he confirmed the assessment on this point. 4. In the further appeals before us it was contended on be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rojects. The manner of utilisation was to re-lend the amount to the agricultural Refinance Development Corporation which will under a subsidiary loan agreement give it to participating banks which will process the loan applications of the ultimate beneficiaries. The agreement stipulates various conditions for carrying out the project and has as its annexure a project agreement which states that the terms and conditions under which the ARDC will enter into subsidiary loan agreements. The agreement shows that the ARDC shall at all times manage and maintain its financial position by complete information and control over the participating banks which are required to maintain separate accounts for the projects. The schedule to that agreement pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs for all other minor irrigation and land development loans and for other 7 years for pump-sets and 9 years for minor irrigation projects and for other beneficiaries it will be 15 years for the minor irrigation investments. An important stipulation is that the loans shall not be re-payable on demand. 6. The agreement between the assessee and the IDBI is dated 23-8-1978 and contains stipulations which are almost the same as that with the ARDC Here again refinancing is given in the form of loans at the stipulated rate of interest and the IDBI maintains complete control and requires the assessee to keep a separate account and furnish full information as well as assign security taken for the loans. In particular, there are stipulations in bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest accrued to the assessee. 8. It was contended on behalf of the revenue relying on the decision in the case of CIT v. Canara Bank [1989] 175 ITR 601/24 Taxman 254 (Kar.) that unless diversion by overriding title is established as in that case the amount paid to the re-financing institutions could not be excluded from the chargeable interest. But we find that that decision which has followed the decision of the Madhya Pradesh High Court in CIT v. State Bank of Indore [1988] 172 ITR 24 actually supports our conclusion. Those cases related to the bills re-discounting scheme of the IDBI where it was found that when the bills were re-discounted there was an overriding title to the IDBI. It was particularly mentioned by the court that the sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the bank and, therefore, in computing the chargeable interest the amounts paid to the IDBI and the ARDC should be taken into account. We direct accordingly. 9. The assessee had received interest from Co-operative Land Development Bank amounting to Rs. 3,842, Rs. 12,751 and Rs. 42,375 in the previous years relevant to the assessment years 1979-80, 1981-82 and 1982-83 respectively. The contention of the assessee is that this interest is received on debentures issued by the said bank and was to be assessed as income from security in the income-tax assessment and therefore to be excluded from the interest under the Interest Tax Act. The CIT (Appeals) accepted this contention. The revenue is in appeal to contend that the Co-operative Land ..... X X X X Extracts X X X X X X X X Extracts X X X X
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