TaxTMI 
TaxTMI 
2016 (8) TMI 228
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....nbsp; 2. These matters were admitted by this Court for consideration of the following substantial question of law: TAX APPEAL No. 113 of 2007 (A) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) deleting an amount of Rs. 14,98,43,517/- being interest paid to National Housing Bank, from the chargeable interest? (B) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) in deleting an amount of Rs. 14,33,592/- being processing fees, reimbursement charges and damage charges, from the chargeable interest? (C) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) in deleting an amount of Rs. 51,78,071/- being interest portion of lease rental, from the chargeable interest?? Tax Appeal No. 112 of 2007 (A) Whether the Appellate Tribunal is right in law and on facts in holding that penal interest of Rs. 21,63,653/- cannot be considered in the chargeable interest? (B) Whether the Appellate Tribunal is right in law and on facts in holding that interest on inter corporate deposits cannot be included in the chargeable interest?? ....
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....67,067/- being interest paid NHB? [2] Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by CIT(A) in deleting the amount of Rs. 3,28,46,914/- being interest EMI residual? 3.1 So far as the question of interest payable to NHB on financing scheme is concerned, the interest amount on this account considered chargeable under the Interest Tax Act by the Assessing Officer was directed to be deleted by the CIT(A). The Appellate Tribunal confirmed the decision of the CIT(A) to deduct the said interest from the gross interest for the purposes of Interest Tax Act. 4. Mr. M.R. Bhatt, learned Senior Counsel appearing with Ms. Mauna Bhatt, learned advocate for the revenue has drawn the attention of this Court to section 2(5), 2(7), 5 and 6 more particularly explanation to section 6 of Interest Tax Act and contended that if we look closely to the provisions of these sections, it is clear that under the Interest Tax Act it is the gross interest which is chargeable to tax and the direction of the Tribunal is contrary to the provisions of the Act. In this regard he has relied upon a decision of the Apex Court in the case of Commissioner of Income Tax, Bom....
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....y the eligible credit institutions such as banks to the industrial concerns for setting up of industrial projects and for their expansion, modernisation and diversification schemes. Such industrial concerns include village, tiny, small and medium scale industries and such others which could be commonly understood as credit institutions eligible. The needy industrial concerns have to approach the eligible credit institutions for getting term loans for financing their projects and for this purpose the credit institutions have to apply, in turn, to the Industrial Development Bank of India for refinancing against the loan assistance sanctioned by them. These credit institutions get in touch with the Industrial Development Bank of India as a result of a general agreement for availing of refinance under various schemes of refinance. Under the Refinance Scheme, although the Industrial Development Bank of India appraises the refinance application from the point of compliance of various norms, terms and conditions under the scheme, the bank bears the primary responsibility regarding the loan assistance granted by it. In the context of the question for our consideration, the bank would be th....
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.... Section 5 of the Act as accruing or arising to the credit institutions in the concerned previous year. The obvious situation is that if the assessee, as the credit institution, is only to collect and pass it over to the Industrial Development Bank of India, then obviously the amount in question will not satisfy the character that it is interest income which accrued to the credit of the assessee the credit institution. 19. Our examination of the scheme that is placed before us, makes it abundantly clear that whatever is collected by the assessee-bank is to pass over to the Industrial Development Bank of India and it is to be understood in the nature of repayment obviously with regard to the money advanced by the Industrial Development Bank of India alone. In such a situation, the concerned amount cannot have the legal requirement in terms of the Interesttax Act to be the "chargeable interest" because it cannot be said that on the said amount, interest has accrued or arisen to the credit of the institution in the concerned previous year. " 6. We have considered the arguments canvassed by both the learned advocates with regard to the two questions quoted hereinabove. Considering th....
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....ds the service of collection and rendering them to HDFC. Therefore the amount received is not in nature of interest but in the nature of service charges and therefore the same cannot be subjected to interest tax. Therefore we answer both the questions in favour of assessee and against the revenue. 10. The other two questions which we now propose to discuss and answer are : (B) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) in deleting the amount being processing fees, reimbursement charges and damage charges, from the chargeable interest? (C) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) in deleting the amount being interest portion of lease rental, from the chargeable interest?? 11. Mr. J.P. Shah, learned advocate appearing for the assessee submitted that so far as the above two questions are concerned, the assessee is the owner and it is a lease income and cannot be considered as interest income. He has relied upon the decision of the Apex court in the case of State Bank of Patiala vs. Commissioner of Income Tax reported in [2016] 383 ITR 244 (SC) wherein paras....