INDIAN BANKS ASSOCIATION BOMBAY Vs. DEVKALA CONSUTANCY SERVICE

JUDGEMENT

(1.) The authority of the bankers to round up the existing interest rates to 0.25% is in question in these appeals which arise out of a judgment and order dated 18-12-1994 passed by the High Court of Karnataka in Writ Petition No. 3927 of 1994, Civil Appeal No. 5218 of 2000 has been filed by the Association of Borrowers of Karnataka upon getting itself impleaded as a party in the connected appeal.

(2.) Appellant No. 1 herein is an Association of Bankers. Appellant Nos. 2 to 28 are banks which were created under respective Parliamentary Acts or nationalised in terms of provisions of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980.

(3.) Interest Tax Act was enacted by the Parliament w.e.f. 1-8-1974 with an object of imposing tax on the total amount of interest received by Scheduled Banks/Credit Institutions on loans and advances. It, however, was withdrawn in the year 1978, but reintroduced in the year 1980; whereafter it was again withdrawn in the year 1985. The said tax, however, was reintroduced w.e.f. 1-10-1991 by reason of Finance Act, 1991. The Reserve Bank of India by its Circular letter dated 2-9-1991 advised all the Scheduled Commercial Banks that the incidence of interest tax should pro rata be passed on to the borrowers wherefor a uniform practice should be followed in consultation with the first appellant herein.