2015 (2) TMI 369

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.... money and, for that purpose, charged from its borrowers certain amounts under different heads which included "financing charges". The AO was of the opinion - for assessment year 1996-97, that the amount claimed as processing charges was in fact interest, and liable to be treated as such for the purposes of the Interest Tax Act, 1974. To say so, the AO relied upon the inclusive nature of definition of interest under Section 2 of the said Act. Consequently, the sum of Rs. 3,17,52,377/- was added back and brought to tax under the Interest Tax Act. The assessee's appeal partly succeeded in that the amount added back was halved. The further appeal to the ITAT however succeeded. 3. The ITAT, relying upon the decision of the Madhya Pradesh Hig....

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....at as it may. There is no material brought by the AO to come to a conclusion that the financing charges shown by the assessee were infect in the nature of interest on loans advanced by the assessee to its members. A perusal of the order of the Ld. CIT(A), shows that he has gone by the fact that the market rate of financing charges charged by the assessee was much higher and to the extent to which it is higher than the market rate there was a diversion of chargeable interest to that extent. He further, corroborated his findings by the fact that the borrowers were members of the assessee and that as lender, the assessee would be in a position to exercise undue influence over its borrowers. This was not enough to come to a conclusion that the ....

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....of in India; and           (b) discount on promissory notes and bills of exchange drawn or made in, India, but does not include- (i) interest referred to in sub- section (1B) of the Reserve Bank of India Act, 1934 ; (2 of 1934) (ii) discount on treasury bills; What is chargeable interest is provided for by Section 5 of enactments which reads as follows :              "Scope of chargeable interest" Subject to the provisions of this Act, the chargeable interest any previous year of a credit institution shall be the total amount of interest other than interest on loans and advances made to (other credit institutions or ....