TaxTMI 
TaxTMI 
1998 (6) TMI 82
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....is assessable as income from business and not as interest on securities?" The assessee is a banking company. In its assessment for the assessment year 1977-78, the assessee claimed that its income from interest and discount on the treasury bills amounting to Rs. 20,62,034 should be considered as income from securities, though in the computation of total income originally furnished along with the return the assessee itself had considered and shown the same as business income. It was contended that the treasury bills were securities under the Public Debt Act and discounts earned on the same represented interest on securities. The Income-tax Officer did not accept the above claim of the assessee. According to him, the amount received by the....
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....ry bills is nothing but interest on securities and hence assessable not as business income but as interest on securities. It was further submitted that the treasury bills, which are issued by the Central Government or the State Government, are securities of the Central or the State Government and interest thereon is interest on securities chargeable under section 18 of the Act. Our attention was also drawn to the fact that treasury bills are issued by the Government when it requires temporary loans and the sale and purchase thereof is managed by the Reserve Bank of India. Mr. Khatri, learned counsel for the respondent, on the other hand, submits that the discount on treasury bills would be assessable not as interest on securities but as bus....
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....we may refer to the definitions of "Government Security" contained in the Public Debt Act, 1944. "Government security" has been defined in clause (2) of section 2 of the said Act to mean :--- "(a) a security, created and issued, by the Government for the purpose of raising a public loan, and having one of the following forms, namely :--- (i) stock transferable by registration in the books of the Bank; or (ii) a promissory note payable to order; or (iii) a bearer bond payable to bearer; or (iv) a form prescribed in this behalf; (b) any other security created and issued by the Government in such form and for such of the purposes of this Act as may be prescribed." Promissory note has been defined in clause (4) of the said ....
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....utilised." It is clear from the above that "interest" is a word of wide impact. It means "interest payable in any manner" in respect of moneys borrowed or debt incurred and includes even service fees or other charges in respect of the moneys borrowed. Treasury bills, in India, are issued by the Government of India when it requires temporary loans. They are generally issued at discount and payable in full on maturity. The sale and payment of these treasury bills is managed by the Reserve Bank of India. The State Governments of some of the major States also raise small-term loans by means of treasury bills. These bills generally have currency of 3 to 12 months. The treasury bills provide an excellent liquid investment for surplus funds ....