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TMI Blog2014 (8) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... - Had the Parliament been of the view that a transaction purchase of bills of exchange is on par with the transactions of loans and advances and wanted to levy tax on every amount that is recovered in the form of interest, penal or otherwise, it would have certainly included such transactions in the definition clause or in the other charging sections - That is not have been done, the assessing authority cannot be permitted to widen the scope of the Act – Decided against Revenue. - R.C. No. 46 of 1999 - - - Dated:- 10-6-2014 - L. Narasimha Reddy And C. Kodanda Ram,JJ. For the Petititoner : Sri S. R. Ashok, Learned Standing Counsel for the IT Dept. For the Respondent : Sri S. Dwarakanath, Learned Counsel ORDER (Per LNR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Tribunal. Through its common order dated 22.10.1997 the Tribunal held that the amounts representing overdue interest on demand bills are not liable to be levied the tax under the Act. The Revenue was not satisfied with the outcome of the appeals and accordingly filed applications under Section 256 (1) of the Income Tax Act with a request to refer the common question to this Court. Through its order dated 26.5.1998, the Tribunal referred the question noted above. Sri S.R. Ashok, learned standing counsel for the Income Tax Department submits that the Act takes in its fold, the interest liveable on loans and advances as well as the amounts covered by Bills of Exchange purchased by the Bank. He submits that once the respondent collecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7) of the Act as under: 2(7) interest means interest on loans and advances made in India and includes (a) commitment charges on unutilised portion of any credit sanctioned for being availed of in India; and (b) discount on promissory notes and bills of exchange drawn or made in India, but does not include (i) interest referred to in sub-section (1B) of section 42 of the Reserve Bank of India Act, 1934 (2 of 1934); (ii) discount on treasury bills;] If we take the language employed in the provision, into account, we gain an impression, that it is inclusive in nature. However, if the purport of the regulation is examined a bit deep, it becomes clear that it is restrictive in nature. The reason is that it is only the interest, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... boration, this much however can be culled out from the order of the assessment, that the transactions, as regards which tax was ordered to be levied are in the nature of purchase of Bills of Exchange. It is not uncommon that banks purchase Bills of Exchange from their customers and make payments, on being satisfied that they are in order. Whenever the purchase of Bills of Exchange takes place, the purported transaction comes to be governed by Section 32 of the Negotiable Instrument Act. The basic transaction of borrowing and lending is required to be between the persons described as maker and acceptor under Section 32 of the Negotiable Instrument Act. The person who purchased the Bills of Exchange becomes the bearer thereof. Section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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