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TMI Blog2005 (9) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... ved in all the cases are the same or similar, all the references are disposed of by this common order. The facts as narrated by the Tribunal are as under: The assessee-banks filed interest-tax returns for the assessment years 1992-93, 1993-94, 1994-95 and 1995-96 and they were accepted. Subsequently, those assessments were reopened under section 10 of the Interest-tax Act on the ground that the assessees had failed to declare the entire interest earned on securities. A notice was issued. The assessees again filed returns of interest showing the same figure as was shown in the original returns. The assessees objected to the addition of interest on securities to chargeable interest on the ground that the interest chargeable under the Interest-tax Act was only interest on loans and advances and securities do not fall within the purview of the definition of "interest" under the Interest-tax Act. The banks' contention was rejected. The entire interest on securities was brought to tax. Appeals were preferred before the Commissioner of Income-tax (Appeals). The appeals stood dismissed. Thereafter, the banks preferred appeals before the Income-tax Appellate Tribunal. The Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities (Contracts) Regulation Act, 1956 and the dictionary meaning of "loan" in support of his submission. He would argue that section 2(7) earlier specifically provided for exclusion with regard to interest on securities. Later on the exclusion is included. Therefore according to him, in the light of inclusion of exclusion it has to be an inclusion for the purpose of the Interest-tax Act. He would rely on Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT [1997] 227 ITR 172 (SC) and CWT v. Smt. Janki Kishori Devi [1991] 192 ITR 229 (All) in the matter. While countering the arguments of the learned counsel for the petitioners, Sri Sarangan, learned senior counsel, would invite our attention to the order of the Tribunal, to say that the order of the Tribunal is proper and legal. The Tribunal after analysing the various relevant factors has come to the right conclusion in answering this issue in favour of the assessee. In so far as the reopening is concerned, he would say that the reopening is bad in law in terms of the reasons for reopening as contained in the file of the Department. He would further invite our attention to the Interest-tax Act in particular to section 2(7) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in a notice under section 7, and may proceed to assess or reassess, the amount chargeable to interest-tax, and the provisions of this Act shall, so far as may be, apply, as if the notice were a notice issued under that section." According to the petitioners section 10(b) is applicable to the facts of this case. The said provision provides for reopening of the assessment in consequence of information in the possession of the Assessing Officer in terms of section 10(b) of the Act. In the course of arguments, it is brought to our attention by learned counsel for the Department that in the light of the notification dated September 11, 1995, the Department has reopened the assessment since that notification would be "information" for the purpose of the Act. He would rely on a judgment of the Supreme Court reported in Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1, wherein the Supreme Court has considered that the word "information" in section 34(1)(b) included information as to the true and correct status of law and so would cover information as to relevant judicial decisions. He would say that in the light of the notification the Department is justified in reopening the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is very clear that interest on securities is subject to interest-tax." In the light of these reasons what is clear to us is that there is no reference to the notification as sought to be argued before us for the purpose of reopening of the assessment in terms of section 10 of the Act. At this stage, we must notice a binding judgment of the Supreme Court reported in Andhra Bank Ltd. v. CIT [1997] 225 ITR 447, and the Supreme Court has ruled that reopening of the assessment is not possible unless any information came from an extraneous source. The Supreme Court also ruled that there was no information available with the Income-tax Officer on the basis of which he could reopen the assessments. This was a case of mere change in opinion and therefore the assessments had not been validly reopened under section 147(b) of the Income-tax Act. The said judgment is applicable to the facts of this case. Material facts would show that there is only change of opinion and that there is no information as such as required in terms of section 10 of the Act. In the light of this clear factual position available on record, we are of the view that the Department could not have reopened the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y" meaning thereby promissory notes, stock certificates and other securities issued by the Central Government or State Government. Our attention is also drawn to the Public Debt Act, 1944, and in particular to the definition in section 2 of the Act. Learned counsel further invites our attention to the dictionary meaning of loans to say that the Department is right in reopening and in taxing interest on securities. Sri Sarangan, learned senior counsel appearing for the banks, would say that the intention of the Legislature cannot be inferred in the way in which it is sought to be argued by the Revenue. He would further say that security stands on a different footing as compared to loans. He also relies on several judgments in support of his submission. In the light of the rival submissions, we are required to see the definition in terms of the Interest-tax Act. Section 2(7) prior to substitution read as under: "'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 do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udible in section 2(7) of the Interest-tax Act. We may also notice various case law cited before us by the parties with regard to this aspect of the matter. In CIT v. Lakshmi Vilas Bank Ltd. [1997] 228 ITR 697, the Madras High Court has considered as to how debenture interest was not interest on "loans and advances": "If the interest is on loans and advances, then such interest is taxable under the Interest-tax Act. But if the interest received by the assessee on debentures is considered to be received on securities, then such interest would not be liable to be taxed under the Interest-tax Act. From the way in which the assessee-company treated the interest received on debentures as per the provisions of section 29 of the Banking Regulation Act, and showing the same under the head 'Investment' and not under the head 'Loans and advances' in the balance sheet, since the assessee is compelled to make a certain percentage in the approved securities in the stated institutions, from the point of view of the assessee, the Tribunal held that the interest on debentures would amount to interest on securities, and, therefore, goes beyond the purview of the provisions of the Interest-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of this court in the case of Unit Trust of India [2001] 249 ITR 612, it has been held that interest-tax is a special tax. It operates as an indirect levy on the borrower. This is indicated by section 26C of the Act which lays down that a lender can modify the existing agreement so as to pass on the burden of interest-tax to the borrower. Therefore, keeping in mind the object and the scheme of the Act we have to interpret section 2(7) of the Interest-tax Act, 1974, which defines 'interest' to mean interest on loans and advances including commitment charges, discount on promissory notes but excluding discount on treasury bills. If one reads section 2(7) of the Act, it is clear that an instrument which passes on the burden of interest-tax to the borrower is excluded from the definition of the word 'interest' in section 2(7) like in the case of discount on treasury bills because, in such cases, the Government is the borrower. Further, loans and advances, as a concept, are different and distinct from investments in the commercial sense as also in the accounting sense as also under sections 370 and 372 of the Companies Act as also under section 29 read with Schedule III of the Banking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the exclusionary clause by the Finance (No. 2) Act, 1991 had no consequence on the main section 2(7). Therefore the exclusionary clause which existed prior to October 1, 1991, was only clarificatory in nature." The Allahabad High Court in CIT v. Sahara India Savings and Investment Corporation Ltd. [2003] 264 ITR 646, after a detailed discussion ruled at page 652 reading as under: "In our opinion, the only correct interpretation of this provision can be that firstly nothing is interest except interest on loans and advances. Secondly, two other categories are also included in the definition of the word 'interest' as specified in clauses (a) and (b) of section 2(7). In our opinion, the word 'means' can only have one meaning, that is, it is an exclusive definition vide P. Kasilingam v P.S.G. College of Technology [1995] Supp 2 SCC 348. When we say that a word has a certain meaning then by implication we mean that it has no other meaning vide Punjab Land Development and Reclamation Corporation Ltd. v. Presiding Officer, Labour Court [1990] 77 FJR 17; [1990] 3 SCC 682. However, when certain other categories are added then it means that only those additional categories will be incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Investment Corporation Ltd. [2003] 264 ITR 646. In the light of the definition in terms of section 2(7) of the Interest-tax Act, and in the light of the purpose behind the Act and also in the light of three detailed judgments, we are clear in our mind that the Tribunal is right in coming to a conclusion that the interest on securities is not taxable under the Act. Before concluding, we must also refer to the latest judgment of the Supreme Court in Commissioner of Trade Tax v. Kajaria Ceramics Ltd. [2005] 5 RC 204 ; [2005] 141 STC 406 (SC) ; AIR 2005 SC 2968 ; AIR 2005 SCW 3540. The Supreme Court has considered the word 'means' in the said judgment and ruled as under: "Generally when the definition of a word begins with 'means' it is indicative of the fact that the meaning of the word has been restricted; that is to say, it would not mean anything else but what has been indicated in the definition itself .... Therefore, unless there is any vagueness or ambiguity, no occasion will arise to interpret the term in a manner which may add something to the meaning of the word which ordinarily does not so mean by the definition itself, more particularly, where it is a restrictive ..... X X X X Extracts X X X X X X X X Extracts X X X X
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