Chargeable interest under the Interest-tax Act cannot be assessed in a collecting agent's hands where the income belongs to another entity.

Interest received under a transfer arrangement was held not to be chargeable interest in the hands of the assessee-bank because the bank acted only as a collecting agent and retained service charges, while the interest itself accrued to the transferor corporation. Applying section 5 of the Interest-tax Act, 1974, the court reasoned that chargeable interest must accrue or arise to the credit of the institution sought to be taxed. As the disputed sum was not the bank's own interest income, it could not be assessed against the bank under the Act.

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Issues: Whether interest collected by the assessee-bank as a collecting agent under the transfer arrangement constituted chargeable interest assessable in the hands of the assessee under the Interest-tax Act, 1974.

Analysis: The amount in question represented interest accruing to the transferor corporation, while the assessee-bank merely acted as a collecting agent and received only service charges. Under section 5 of the Interest-tax Act, 1974, chargeable interest means the total amount of interest accruing or arising to the credit of the institution. Since the disputed sum did not accrue to the assessee and was not its interest income, it could not be brought to tax in the assessee's hands.

Conclusion: The amount was not chargeable interest assessable against the assessee-bank under the Interest-tax Act, 1974, and the answer was in favour of the assessee.

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