Interest arising on internal placements between an Indian branch...

Interest arising on internal placements between an Indian branch and its head office or overseas branches was treated as a payment to self and not taxable income; interest from other overseas banks also escaped tax because the statutory condition for source-based taxation was not met, and the specific interest provision excluded resort to the general charging provision. Disallowances under section 14A failed where concessional-rate interest remained taxable, and also where interest-free funds covered exempt-income investments. Broken period interest on securities held as stock-in-trade, year-end foreign exchange revaluation loss, club membership fee for employees, and CRR/SLR shortfall payment were all held allowable. Interest charged on refund processing was not sustained, and bad debt write-back was remitted only for verification of prior taxation.

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