TaxTMI 
TaxTMI 
1997 (3) TMI 89
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....d in the circumstances of the case, the Tribunal was right in holding that only the proportionate interest of Rs. 5,19,804 or borrowings should be deducted from the interest amount of Rs. 12,93,828 received by the assessee from the Indian concerns, and not the whole of the interest amount of Rs. 10,12,252 paid by the assessee to various parties, in order to determine the net interest income for the purposes of exclusion from the chargeable profits in terms of clause (x) of rule 1 of the First Schedule to the Super Profits Tax Act, 1963 ? " The short facts leading to the questions being referred are that the assessee, Banque Nationale de Paris, is a non-resident company and admittedly it had not made any arrangement for declaration and payment of dividends in India during the calendar year 1962. A sum of Rs. 2,18,802 which the assessee had received towards interest on securities had been included in the assessee's total income for the purpose of assessment. The assessee's contention was that the super profits tax assessment made by the Departmental authority is erroneous as the assessee was entitled to exclusion of the aforesaid interest amount in computing the chargeable profits....
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....amount of interest which the assessee received from various sources was Rs. 25,19,560. The assessee before the Super Profits Tax Officer had claimed deduction of the entire Rs. 12,93,828 which it had received by way of interest on advances given to Indian concerns. The Super Profits Tax Officer in computing the income by way of income from Indian concerns arrived at the figure of Rs. 1,61,617. The Super Profits Tax Officer was of the view that the interest to be excluded from the chargeable profits is the net amount of interest after deducting the interest which the assessee paid to its depositors and creditors as well as after deducting other proportionate expenses and thus the said Super Profits Tax Officer determined that the net income by way of interest to be excluded from the chargeable profits on this head is Rs. 1,61,617. The assessee then carried the matter in appeal to the Appellate Assistant Commissioner who came to the conclusion that the interest which the assessee received from Indian concerns to the extent of Rs. 12,93,828 should be reduced by that proportion which the interest which the assessee himself had received from Indian concerns bears to the total interest r....
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....been applied by the appellate authority and confirmed by the Tribunal and even the High Court has answered the question framed in favour of the assessee. Mr. Ganesh, learned counsel appearing for the assessee, on the other hand, contended that the assessee being a non-resident company and clause (x) having made it clear that income by way of any interest which the company receives from any Government or local authority or Indian concern, it is clause (x) that would apply and, therefore, the High Court has not committed any error in answering the question posed in favour of the assessee. For better appreciation of the point in issue it will be appropriate to extract clauses (vi) and (x) in extenso : " (vi) income chargeable under the Income-tax Act under the head "Interest on securities" derived from any security of the Central Government issued or declared to be income-tax free or from any security of a State Government issued income-tax free, the income-tax whereon is payable by the State Government ; (x) in the case of a non-resident company which has not made the prescribed arrangements for the declaration and payment of dividends within India, its income by way of any ....
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.... the case of a non-resident company the computation has to be made in accordance with the said clause, so far as the interest received on Government securities are concerned and clause (x) would apply only in respect of other income by way of interest for the non-resident company not covered under clause (vi). According to Dr. Gauri Shanker, learned senior counsel appearing for the appellant, the emphasis is on the head from which the income is derived and not on the status of the assessee. Having considered the rival submissions we find considerable force in the argument advanced by learned counsel appearing for the Revenue. Under Chapter IV of the Income-tax Act, the total income of an assessee is computed and under section 14 there are only six heads of income, namely : A. Salaries ; B. Interest on securities ; C. Income from house property ; D. Profits and gains of business or profession ; E. Capital gains ; and F. Income from other sources. Head B has been omitted by the Finance Act, 1988 with effect from April 1, 1989, but was there during the relevant period with which we are concerned in the present case. Section 18, as it stood, deals with "interest....
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.... and gains" of business was under section 10 and the question arose as to where the banker holds securities as part of his trading business in the course of his business and derives interest therefrom then under which head the same would fall. It was in this context that this court observed: " The head of income of which the source is 'interest on securities' has its characteristics for income-tax purposes and falls under the specific head covered by section 8 of the Act, and where an item falls specifically under one head it has to be charged under that head and no other. This interpretation follows from the words used in sections 6, 8 and 10 which must be read so as to give effect to the contrast between 'income', 'profits and gains' chargeable under the heads 'Interest on securities' and 'Income, profits and gains' chargeable under the head 'Business'. Thus on this construction the various heads of 'income, profits and gains' must be held to be mutually exclusive, each head being specific to cover the item arising from a particular source. It cannot, therefore, be said that qua the assessee in the present case and for the purpose of securities held by it, section 8 is more sp....