The Commisioner Of Income Tax vs The Catholic Syrian Bank Ltd. on 4 June, 2008

       

  

  

 
 
  IN THE HIGH COURT OF KERALA AT ERNAKULAM

ITA.No. 297 of 2002()


1. THE COMMISIONER OF INCOME TAX, TRICHUR
                      ...  Petitioner

                        Vs



1. THE CATHOLIC SYRIAN BANK LTD.,TRICHUR.
                       ...       Respondent

                For Petitioner  :SRI.GEORGE K. GEORGE, SC FOR IT

                For Respondent  :SRI.K.VINOD CHANDRAN

The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice V.K.MOHANAN

 Dated :04/06/2008

 O R D E R
                       C.N.RAMACHANDRAN NAIR &
                                  V.K.MOHANAN, JJ.
                  ....................................................................
                             I.T. Appeal No.297 of 2002
                  ....................................................................
                     Dated this the 4th day of June, 2008.

                                         JUDGMENT

Ramachandran Nair, J.

Heard Senior counsel appearing for the Income Tax department and

Senior counsel Sri.Sarangan appearing for the respondent. The question

raised is whether assessee is liable to pay interest tax under the Interest Tax

Act on the interest received on Government securities. While counsel for

the assessee referred to the decision of the Karnataka High Court in

COMMISSIONER OF INCOME-TAX V. VIJAYA BANK (2006) 285 ITR

97 rendered in the case of three Banks which is confirmed by the Supreme

Court in COMMISSIONER OF INCOME-TAX V. CORPORATION

BANK (2007) 295 ITR 193, Senior counsel for the Revenue referred to the

two decisions of the Bombay High Court in DISCOUNT & FINANCE

HOUSE OF INDIA LTD. V. S.K.BHARDWAJ, C.I.T. & OTHERS (2003)

259 ITR 295 and in COMMISSIONER OF INCOME-TAX V. UNITED

WESTERN BANK LTD. (259 ITR 312) wherein the Bombay High Court

has left open the liability for interest under the Interest Tax Act on securities

held as current assets by the Banks. He specifically referred to the decision

2

of the Supreme Court and contended that the decision applies only to dated

securities. However, Senior counsel appearing for the assessee contended

that the decision affirmed by the Supreme Court is that of the Karnataka

High Court which has dealt with all Government securities and not only

dated securities. We do not think there is any difference between dated

securities and other securities for the purpose of levy of tax under the

Interest Tax Act because tax on interest is payable only on loans and

advances. The securities of Reserve Bank of India and Government of India

are in the nature of investment, the interest wherefrom is held not taxable

under the Interest Tax Act by the Karnataka High Court. Sicne the decision

of the Karnataka High Court is upheld by the Supreme Court in the decision

abovereferred, we dismiss this appeal following the said decision.

C.N.RAMACHANDRAN NAIR
Judge

V.K.MOHANAN
Judge
pms