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TMI Blog2005 (10) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... . DINAKARAN., N. KANNADASAN. JUDGMENT The judgment of the court was delivered by P.D. Dinakaran J.-The above tax case appeal is directed against the order of the Income-tax Appellate Tribunal in I.T.A. No.70/Mds/2001, dated May 9, 2005. The Revenue is the appellant. The assessment year involved is 1995-96. The case of the appellant is that the assessee/respondent herein is a scheduled bank engaged in the business of banking. In the interest-tax assessment, the Assessing Officer made an addition on account of interest on Government securities, interest on tax free investment, interest on bonds, interest on treasury bills and interest received on investment deposit scheme-IDBI, which the assessee had not included and subjected the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government. Therefore, the Act has been operating intermittently depending upon the economy of the country. Section 2 of the Interest-tax Act, 1974, is a definition section. It starts with the expression 'in this Act, unless the context otherwise requires'. Section 2(7) forms part of the definition section. It defines the word 'interest' to mean interest on loans and advances including commitment charges, discount on promissory notes but excluding discount on treasury bills. Section 2(7), read in the context of section 26C, which permits the lender to modify the existing agreement so as to pass on the burden of interest-tax to the borrower, shows that 'interest' in section 2(7) does not include interest on dated Government securities. Lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he RBI during the year 1993-94 on dated Government securities as it would mean levy of tax indirectly on the RBI under section 26C. [It was made clear that the judgment applied only to the interest paid by the RBI to the petitioner on its holding the dated Government securities in SGL account with the RBI.]" In view of the above settled proposition, we hold that the Tribunal was right in holding that interest on Government securities, interest on tax free investment, interest on bonds, interest on treasury bills and interest received on investment deposit scheme-IDBI would not be subject to tax under the Interest-tax Act. Accordingly, the question of law is answered in the affirmative, against the Revenue and in favour of the assessee. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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