- (1.) This appeal under Section 260A of the Income-tax Act, 1961 read with Section 21 of the Interest Tax Act, 1974 is at the instance of an assessee and is directed against order dated 19th December, 2003 passed by the Income-tax Appellate Tribunal, B Bench, Kolkata, in Interest Tax Appeal No.11(Cal) of 1997 relating to the Assessment Year 1992-93 dismissing the appeal field by the assessee.
(2.) The facts giving rise to filing of this appeal may be summed up thus: a) The appellant is a company mainly engaged in the business of insurance other than that of life insurance. The petitioner company is also categorized as Public Financial Institution under Section 4A of the Companies Act, 1956 and is also engaged in the investment activities like purchase and sale of shares, debentures, bonds, government securities etc. As part of its investment business, the appellant also provides various types of loans and advances to different companies as well as Credit Institutions under different schemes like term loans, loans under bill rediscounting scheme, loans by way of deposits as call money, loans against mortgage of property, loans to the State Governments for housing and firefighting equipment etc. b) The appellant had filed its return of chargeable interest in respect of the previous year being the Financial Year ending 31st March, 1992 corresponding to the Assessment Year 1992-93 on 28th December, 1994 declaring its chargeable interest under the Interest Tax Act, 1974 as the sum of Rs.5,21,33,78/. In filing its return, the appellant claimed exemption from levy of interest tax as not forming part of the chargeable interest in respect of various items including the sum of Rs.16,97,65,816/- representing interest on bills rediscounting scheme with banks as per details given in the three statements. c) The Assessing Officer, however, by the order dated 30th March, 1995 under Section 8(2) of the said Act held that interest on call money and bills rediscounting could not be termed as interest on loans and advances and accordingly held such interest to be part of chargeable interest. d) Being dissatisfied, the appellant preferred an appeal under Section 15(1) of the Act before the Commissioner of Income-tax (Appeals) and the said authority by order dated 20th January, 1997 dismissed the same thereby holding that call money and bills rediscounting scheme with banks could not be termed as interest on loans and advances and that those were rightly included by the Assessing Officer in the appellant s chargeable interest computed under Section 5 read with Section 6 of the Act. e) Being dissatisfied, the appellant preferred an appeal before the Tribunal below. The said Tribunal by order dated 19th December, 2003 came to the conclusion that call money did not fall within the ambit of chargeable interest, but so far the interest on bills rediscounting scheme with banks were concerned, the same was chargeable as interest. f) Being dissatisfied, the appeal has come up with the present appeal. A Division Bench of this Court by order dated 28th April, 2004 formulated the following substantial questions of law for determination: I. Whether on the facts and in the circumstances of the case and on a correct interpretation of Section 2(7) read with Section 2(5) and Section 5 of the Interest Tax Act, 1974, the Income Tax Appellate Tribunal, B Bench, Kolkata misdirected itself in law and it adopted a wholly erroneous approach in confirming that the sum of Rs.16,97,65,816 representing interest received by the appellant assessee company, from the banking companies governed by the Banking Regulation Act, 1949 under the Bills Rediscounting Scheme during the financial year relevant to the assessment year 1992-93, was not the interest on loans and advances made to other credit institutions, and that the same was part of chargeable interest being discount on promissory notes and bills of exchange drawn or made in India and whether its such finding was wholly unreasonable and/or otherwise perverse. II. Whether on the facts and in the circumstances of the case the Tribunal misdirected itself in law and it adopted a wholly erroneous approach in confirming that the sum of Rs.16,97,65,816 representing interest received by the appellant assessee company from different banking companies under the Bills rediscounting scheme, not being interest on loans and advance made to other credit institutions, was not excluded from the definition of interest as contained in Section 2(7) of the Interest Tax Act, 1974.
(3.) Therefore, the only question that falls for determination in this appeal is whether interest received by the appellant under the bills rediscounting scheme from different banking companies to which the Banking Regulation Act, 1949 applies should form part of chargeable interest within the meaning of Section 2(5) read with Sections 5 and 6 of the Interest Tax Act.;