2007 (7) TMI 11

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....ied in holding that an amount representing rediscounting interest paid on promissory note/bill did not accrue or arise to the assessee-bank by reason of diversion of such discount through overriding title in favour of Industrial Development Bank of India (IDBI) and hence did not form part of chargeable interest under Section 2(7) of the Interest-tax Act, 1974 (for short, 'the 1974 Act'). The fa....

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....the IDBI under Section 9(1)(b) of its statute, which authorized IDBI to accept, discount or rediscount bills of exchange, promissory notes of industrial concerns.  The object of the Scheme is two-fold, i.e., to increase the sales of indigenous machinery/capital equipment by offering to the prospective buyers/users deferred payment facilities.  While the manufacturers received the value o....

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....escribed by IDBI.  The seller/manufacturer is also prohibited from charging interest for the deferred payment at an amount higher than the amount paid to the bank.  IDBI under Scheme has a right to refuse rediscounting of bills of such sellers/manufacturers who do not comply with the requirements under the Scheme.  Therefore, the Scheme is enacted basically to give financial assista....

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....ro-notes.  Under the Scheme, the primary responsibility for payment to IDBI is placed on the seller's bank which in the present case is the assessee-bank.  Therefore, the rediscounting charges of IDBI collected by the assessee-bank cannot be "chargeable interest" under Section 2(7) of the 1974 Act since even before the said amount could reach the hands of the assessee-bank, it is impress....