2025 (6) TMI 1490

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....d in coming to the conclusion that the subsidy of Rs. 12,93,55,595/- received by the Appellant from Reserve Bank of India under the Export Credit (Interest Subsidy) Scheme, 1968 forms part of assessable interest under section 2 (7) of the Interest Tax Act, 1974. 2. Facts giving rise to filing of this appeal are that the Appellant is a Public Sector Banking Company formed with the principal object of engaging in banking activity which inter alia comprising of receiving deposits from the public and deploying such deposits with borrowers as advances with a view to earn interest income. The Assessee filed return of income for the year 1992-93 and declared net chargeable interest at Rs. 4,46,54,29,457/-. In the said return Assessee did not inc....

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.... previous years, dismissed the appeal. In the aforesaid factual background this appeal has been filed. 4. Learned counsel for the Assessee while inviting the attention of this Court to Section 2 (7) of the Act submitted that amount of subsidy received by the Assessee from the RBI on the Scheme cannot be treated as 'interest' under Section 2 (7) of the Act. It is submitted that the issue involved in the instant appeal is no longer res integra. In support of the aforesaid submission reliance has been placed on decisions of the Supreme Court in State Bank of Patiala V/s. Commissioner of Income-Tax (2016) 383 ITR 244(SC) and Muthoot Leasing and Finance Ltd. and Another V/s. Commissioner of Income-Tax (2023) 450 ITR 496 (SC). It is pointed out ....

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....ses out of compensation for interest on loan and therefore it partakes the character of interest. In support of her submissions, reference has been made to the Division Bench decision of the Madhya Pradesh High Court in State Bank of Indore V/s. Commissioner of Income-tax (2004) 140 Taxman 500 (MP) (2004. 6. We have considered the rival submissions made by both the learned counsel appearing for the parties and perused the records. 7. The solitary question for consideration is whether the amount of subsidy received by the Assessee from RBI under the Scheme can be treated as 'interest' as defined under Section 2 (7) of the Act. Before proceeding further it is apposite to take note of Section 2 (7) of the Act, which reads as under:- 2 (7) ....

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....Another (supra), it was inter alia; held that character of overdue bill is not synonymous to loans and advances and therefore, it will not fall within the scope and ambit of interest under Part-I of Section 2 (7) of the Act. It was further held that interest is chargeable to tax under the Act only if it arises directly from a loan or advance and not otherwise. It is well settled in law that in construing fiscal statutes and in determining the liability of the subject to tax one must have regard to the strict letter of law. It is equally well settled legal proposition that if a case is not covered within the four corners of provision of taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions....