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TMI Blog1972 (9) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... - 25-9-1972 - Judge(s) : G. RAMANUJAM., V. RAMASWAMY. JUDGMENT The judgment of the court was delivered by RAMASWAMI J.-The petitioner-bank is a public limited company deriving income from interest on securities, business in banking and from other sources. For the assessment year 1962-63, the bank received a sum of Rs. 5,476 towards interest on the following securities issued by the Mysore Government. 1. The Mysore Government 4% conversion loan 1953-63. 2. The Mysore 3% loan 1956-61. The assessee-bank claimed rebate on this entire amount under section 86(i) of the Income-tax Act, 1961. But the Income-tax Officer deducted a sum of Rs. 4,089 as the proportionate interest on the money borrowed for the purpose of the investment an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the banking business which the assessee carried on, the entire expenses should be treated as one lump sum deductible as business expenses and the splitting up of the expenses for realising the interest on tax-free securities and the other expenses is artificial, illogical and not permitted under the provisions of the Income-tax Act. Though this point was not raised before the Income-tax Officer or the Appellate Assistant Commissioner, the Appellate Tribunal allowed that point to be raised, but answered it against the assessee on the ground that the language of sections 19 and 20 supported the method of computation adopted by the Income-tax Officer. At the instance of the assessee, the following two questions have been referred fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear corresponding to the assessment year 1956-57, the South Indian Bank Ltd., Tiruchur, received a sum of Rs. 44,720 towards interest in respect of tax-free Cochin and Travancore securities. The bank claimed that rebate should be allowed on the entire sum of Rs. 44,720 received as interest from the said security, but the Income-tax Officer deducted proportionate interest and expenses and he granted only a sum of Rs. 7,236 as rebate for income-tax. Though the Appellate Assistant Commissioner confirmed the Income-tax Officer's order, the Income-tax Appellate Tribunal held that the bank was entitled to a rebate on the gross amount of interest amounting to Rs. 44,720. The High Court of Kerala agreed with the Tribunal. On appeal filed before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the instant case was issued under section 60(1) of the Indian Income-tax Act, 1922. The relevant portion of the notification reads as follows : " Incomes included in total income but exempt from income-tax and not from super-tax. The following classes of income shall be exempt from the tax payable under the said Act, but shall be taken into account in determining the total income of an assessee for the purposes of the said Act : - ...... (3) Interest receivable on the following securities issued by the Mysore Government: - ...... (2) Mysore Government 4 per cent. Conversion Loan 1953-63....... (4) Mysore 3 per cent. Loan 1956-61......... " Under section 297(2)(1) of the Income-tax Act, 1961, notwithstanding the repeal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the first question, the second question does not arise for consideration. The learned counsel for the revenue pointed out that one of the securities now in question is Mysore 3 per cent. Loan 1956-61. It is, therefore, necessary to find out as a fact whether any security, from which interest has been received and included in the total sum of Rs. 5,476 claimed as rebate in this case, became chargeable to income-tax during the accounting year relevant to the assessment year 1962-63 in this case. The Tribunal and the authorities below did not consider this question as the notification itself did not figure for consideration before them. We, therefore, direct the Tribunal to go into the question whether any of the securities became chargea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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