COMMISSIONER OF INCOME TAX Vs. SOUTH INDIAN BANK LIMITED
LAWS(KER)-1963-2-27
HIGH COURT OF KERALA
Decided on February 19,1963

COMMISSIONER OF INCOME-TAX, KERALA Appellant
VERSUS
SOUTH INDIAN BANK LTD., TRICHUR. Respondents

JUDGEMENT

GOVINDAN NAIR, J. - (1.)THE Income-tax Appellate Tribunal acting under section 66(1) of the Indian Income-tax Act, 1922, has referred the following question of law for our decision :
"Whether on the facts and circumstances of the case, the Tribunal was right in holding that Explanation to section 8 is not applicable in this case and that the entire interest of Rs. 44,720 earned by the assessee from securities issued by the former native States, etc., is entitled to rebate of income-tax ?"

(2.)THE answer to this question depends on the interpretation of section 8 of the Indian Income-tax Act as well as the notification issued by the Central Government acting under section 60A of the Indian Income-tax Act.
Section 8 provides that :

"The tax shall be payable by an assessee under the head Interest on securities in respect of the interest receivable by him on any security of the Central Government or of a State Government, or on debentures or other securities for money issued by or on behalf of a local authority or a company."

There are three provisos to the section and an Explanation. The first proviso reads :

"..... that no income-tax shall be payable under this section by the assessee in respect of any reasonable sum expended by him for the purpose of realising such interest....."

(3.)AND the third proviso is in these terms :
"Provided further that the income-tax payable on the interest receivable on any security of a State Government issued income-tax free shall be payable by the State Government."

The relevant portion of one of the notifications (the notifications are similarly worded) issued under section 60A of the Indian Income-tax Act is worded thus :

"No income-tax shall be payable by an assessee on the interest receivable on the following income-tax free loans issued by the former Government of Travancore or by the former Government of Cochin, provided that such interest is received within the territories of the State of Travancore-Cochin and is not brought into any other part of the taxable territories to which the said Act applies. Such interest shall, however, be included in the total income of the assessee for the purposes of section 16 of the Indian Income-tax Act, 1922 :

3 per cent. tax free loan 1952-54 issued by the former Government of Travancore.

3 1/2 per cent. tax free loan 1956 issued by the former Government of Travancore.

3 per cent. tax free loan 1953-55 issued by the former Government of Cochin.

3 per cent. tax free loan 1955-58 issued by the former Government of Cochin.

3 1/2 per cent. tax free loan 1956-61 issued by the former Government of Cochin."

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