JUDGMENT
G.C. Bharuka, J.
1. The present references have been made by the Income Tax Appellate Tribunal at the instance of the department. These references ertain to the assessment years 1979-80, 1981-82 to 1985-86.
The questions of law required to be answered are as follows
1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the contention of the assessee that the rediscounting interest paid on bills did not accrue or arise to the assessee-bank by reason of diversion of such discount through an over riding title in favour of the Reserve bank of India and the IDBI and hence did not form part of the chargeable interest under the provisions of the Interest-tax Act, 1974 ?
2.Whether, on the facts and in the circumstances of the case, theTribunal is justified in holding that the transaction between theassessee and the IDBI in connection with rediscounting of billsunder the scheme of refinancing by the IDBI and a similar schemeof the Reserve bank of India is a joint venture whereby the purchasers are enabled to pay the price in instalments and hence theinterest paid by the purchasers is to be shared between the two parties viz., RBI and IDBI ?
3.Whether, on the facts and in the circumstances of the case, theTribunal is justified in holding that the transactions contemplated between the assessee and the RBI/IDBI in refinancing scheme framed by the RBI/IDBI is an integrated transaction and cannot be consideredas two separate transactions ?
2. The assessee is a nationalised bank. The assessing officer while determining chargeable interest under the Interest-tax Act, 1974, made additions of rediscounting charges paid to the RBI and the IDBI by holding that the rediscounting charges form part of the interest chargeable under the Interest-tax Act, 1974. On appeal, the Commissioner (Appeals) deleted the additions by holding that it was the net interest that has to be taken for the purpose of determining the chargeable interest. The Tribunal on appeal by the revenue, confirmed the orders of the Commissioner (Appeals).
3. Answers to the above questions of law need not detain as long as on the identical facts as appearing in the present reference, similar questions of law had arisen in the case of the assessee itself for the assessment year 1975-76. The Division Bench of this Court in the case of CIT v. Canara Bank , after threadbare examination of the Industrial Development bank of India rediscounting scheme had held that (page 607):
The scheme, viewed as a whole, makes it clear that the assessee-bank is only a medium or a conduit pipe for the disbursement of the development fund for the implementation of the scheme for which it can retain up to 1.75 per cent. which alone accrues to the bank and in respect of the remaining interest received from the purchaser on the advances made to him, there is an overriding title of the Industrial Development bank of India, as the assessee-bank had to part with a major portion of the discounting charges.
4. We respectfully agree with the view taken by the earlier Division Bench. Therefore, question No. (1) is answered against the department and in favour of the assessee. In view of the answer to question No. 1, the remaining two questions have become academic in nature requiring no answer.