The HC held that subsidy received from Reserve Bank of India...

The HC held that subsidy received from Reserve Bank of India under the Export Credit Interest Subsidy Scheme, 1968 does not constitute assessable interest under section 2(7) of the Interest Tax Act, 1974. The court determined that since no loan or advance was extended by the assessee to RBI, the subsidy amount cannot be characterized as interest within the statutory definition. The subsidy was neither relatable to any loan transaction nor constituted commitment charges or discount on promissory notes. Consequently, the RBI subsidy received under section 42(1B) of the RBI Act, 1934 was not chargeable as interest under section 4 of the Interest Tax Act. The decision aligned with precedent established in Punjab National Bank case, where Revenue's subsequent appeal to SC was dismissed. The assessee's appeal was allowed.