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TMI Blog2004 (6) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... answer the question referred against the assessee and in favour of the Revenue. In other words, we hold that the amount received by the assessee from the Reserve Bank of India is chargeable to tax as interest. X X X X Extracts X X X X X X X X Extracts X X X X ..... received by way of or in the name of export subsidy can only be regarded as such when it is paid to an exporter engaged in the business of export. In other words, he (Assessing Officer) was of the view that it is only when an assessee is engaged in the business of export as an exporter and it is in the course of such export business he receives some money for its utilisation for being used in his export business, the same can be regarded and/or termed as an export subsidy in the hands of the assessee, else not. Since, in this case, the assessee is a bank and not engaged in any export business activity, but is essentially engaged in banking business, nor has received the said sum from the Reserve Bank of India for utilisation in any export a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing urged before the lower authorities. According to him, in order to hold the money received by the assessee to be an interest as defined under section 2(7) of the Act, it must satisfy the requirement of the said section. Learned counsel urged that when the Reserve Bank of India gave the money treating the same as an export subsidy, the same should have been held to be so rather than to treat as an interest. In reply, learned counsel for the Revenue supported the reasoning of the Tribunal and placing reliance on the decision of the Karnataka High Court reported in CIT v. Vijaya Bank [1989] 175 ITR 611 contended that the issue involved in this case stands answered against the assessee and hence, this court should follow the reasoning of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld, that under clause 2(i) of the Export Credit (Interest Subsidy) Scheme, 1968, the subsidy was paid by the Reserve Bank to offset a part of the loss incurred by the assessee as a result of charging interest at a rate lower than the normal rate of interest. The subsidy was dependent upon the loan or advance being given and a lower rate of interest being charged. If the borrower had been allowed to pay at the normal rate of interest to the bank and if he had been subsidised by the Reserve Bank of India towards payment of interest, the assessee could not have raised the sort of contention it had raised. Such a contention could not be raised by the assessee merely because the Reserve Bank of India directly paid the subsidy. The subsidy was p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a misnomer. When the bank has never entered into any export business, the question of its receiving any subsidy under the head export subsidy does not arise. The payment of subsidy is always regarded as an incentive to an entrepreneur to do business effectively and efficiently. In the present case, the assessee extends credit facility to an exporter by charging lower rate of interest. The Reserve Bank of India then compensate the bank by paying the money to the extent of the difference between the specified rate of interest and the rate at which the credit was given by the assessee to the exporter. In such transaction, the element of export so far as the assessee and the Reserve Bank of India is concerned does not arise. In the circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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