Cit Vs. Canara Bank

Cit vs Canara Bank

Type Court Judgment Court Karnataka Decided Aug 01, 2002

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Citation: sooperkanoon.com/387897
Court: Karnataka High Court
Judge: G.C. Bharuka and ;S.B. Majage, JJ.
Decided On: Aug 01, 2002
Subject: Direct Taxation

Case Summary

AI-generated summary - not the official court judgment text.

Head Note: INCOME TAX ACT, 1961 . Chargeable interest--Rediscounting charges Paid to RBI and IDBI--Rediscounting charges diverted by overriding title to RBI and IDBI and, therefore, not includible in chargeable interest under Section 2(7). The rediscounting interest paid on bills did not accrue or arise to the axis-...

Key legal issue: Direct Taxation

Parties & Advocates

Appellant / Petitioner

Cit

Respondent

Canara Bank

Legal References

Reported In: [2007]293ITR113(KAR); [2007]293ITR113(Karn)

Excerpt

head note: income tax act, 1961 . chargeable interest--rediscounting charges paid to rbi and idbi--rediscounting charges diverted by overriding title to rbi and idbi and, therefore, not includible in chargeable interest under section 2(7). the rediscounting interest paid on bills did not accrue or arise to the axis-bank by reason of diversion of such discount through an over riding title in favour of the reserve bank of india and the idbi and hence did not form part of the chargeable interest under the provisions of the itact, 1974. income tax act, 1961 section 2(7) - industrials disputes act 1947 [c,a, no. 14/1947]. section 36(2); [subhash b. adi, j] engaging the services of advocate - application under section 33(c)(2) rejection of application of the employer for engaging the services of the advocate held, on facts, the petitioner having shown that it is a member of industrial and commercial employers association (icea) and the persons sought to be represented being office bearers of the said association, section 36(4) does not prevent them from representing the petitioner notwithstanding they are legal practitioners. orders of labour court rejecting the application was quashed.....by reason of diversion of such discount through an over riding title in favour of the reserve bank of india and the idbi and hence did not form part of the chargeable interest under the provisions of the interest-tax act, 1974 ?2.whether, on the facts and in the circumstances of the case, the tribunal is justified in holding that the transaction between the assesses and the idbi in connection with rediscounting of bill sunder the scheme of refinancing by the idbi and a similar scheme of the reserve bank of india is a joint venture whereby the purchasers are enabled to pay the price in instalments and hence the interest paid by the purchasers is to be shared between the two parties viz., rbi and idbi ?3.whether, on the facts and in the circumstances of the case, the tribunal is justified in holding that the transactions contemplated between the assessee and the rbi/idbi in refinancing scheme framed by the rbi/idbi is an integrated transaction and cannot be considered as two separate transactions ?2. the assessee is a nationalised bank. the assessing officer while determining chargeable interest under the interest-tax act, 1974, made additions of rediscounting charges paid to the rbi and the idbi by holding that the rediscounting charges form part of the interest chargeable under the interest-tax act, 1974. on appeal, the commissioner (appeals) deleted the additions by holding that it was the net interest that has to be taken for the purpose of determining the chargeable interest. the tribunal on appeal by the revenue, confirmed the orders of the commissioner (appeals).3. answers to the above questions of law need not detain as long as on the identical facts as appearing in the present reference, similar questions of law had arisen in the case of the assessee itself for the assessment year 1975-76. the division bench of this court in the case of cit v. canara bank : [1989]175itr601(kar) , after threadbare examination of the industrial development bank of india.....

Full Judgment

G.C. Bharuka, J.

1. The present references have been made by the Income Tax Appellate Tribunal at the instance of the department. These references retain to the assessment years 1979-80, 1981-82 to 1985-86.

The questions of law required to be answered are as follows

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the contention of the assessee that the rediscounting interest paid on bills did not accrue or arise to the axis-bank by reason of diversion of such discount through an over riding title in favour of the Reserve bank of India and the IDBI and hence did not form part of the chargeable interest under the provisions of the Interest-tax Act, 1974 ?

2.Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the transaction between the assesses and the IDBI in connection with rediscounting of bill sunder the scheme of refinancing by the IDBI and a similar scheme of the Reserve bank of India is a joint venture whereby the purchasers are enabled to pay the price in instalments and hence the interest paid by the purchasers is to be shared between the two parties viz., RBI and IDBI ?

3.Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the transactions contemplated between the assessee and the RBI/IDBI in refinancing scheme framed by the RBI/IDBI is an integrated transaction and cannot be considered as two separate transactions ?

2. The assessee is a nationalised bank. The assessing officer while determining chargeable interest under the Interest-tax Act, 1974, made additions of rediscounting charges paid to the RBI and the IDBI by holding that the rediscounting charges form part of the interest chargeable under the Interest-tax Act, 1974. On appeal, the Commissioner (Appeals) deleted the additions by holding that it was the net interest that has to be taken for the purpose of determining the chargeable interest. The Tribunal on appeal by the revenue, confirmed the orders of the Commissioner (Appeals).

3. Answers to the above questions of law need not detain as long as on the identical facts as appearing in the present reference, similar questions of law had arisen in the case of the assessee itself for the assessment year 1975-76. The Division Bench of this Court in the case of CIT v. Canara Bank : [1989]175ITR601(KAR) , after threadbare examination of the Industrial Development bank of India rediscounting scheme had held that (page 607):

The scheme, viewed as a whole, makes it clear that the axis-bank is only a medium or a conduit pipe for the disbursement of the development fund for the implementation of the scheme for which it can retain up to 1.75 per cent. which alone accrues to the bank and in respect of the remaining interest received from the purchaser on the advances made to him, there is an overriding title of the Industrial Development bank of India, as the axis-bank had to part with a major portion of the discounting charges.

4. We respectfully agree with the view taken by the earlier Division Bench. Therefore, question No. (1) is answered against the department and in favour of the assessee. In view of the answer to question No. 1, the remaining two questions have become academic in nature requiring no answer.

Same Court & Year Karnataka · 2002 Same Parties Cit vs Canara Bank Same Subject Direct Taxation Same Judge G.C. Bharuka and ;S.B. Majage, JJ.

Direct Taxation