PUNJAB NATIONAL BANK Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following question of law has been referred for our opinion in respect of the asst. yrs. 1981 -82, 1982 -83 and 1983 - 4: "Whether on the facts and in the circumstances of the case, the amounts of Rs. 23,37,224, Rs. 59,88,360 and Rs. 74,92,486 received by the assessee as export subsidy from the RBI were chargeable as interest under the Interest -tax Act, 1974 for the asst. yrs. 1981 -82, 1982 -83 and 1983 -84 respectively -

(2.) UNDER an export credit subsidy scheme floated by the RBI, nationalised banks were required to advance loans to their customers at a lower rate of interest than the normal commercial rate of interest. It was postulated by the RBI that as a result of this, the banks would suffer a short fall in interest earnings and the deficit would be made up by the RBI by way of subsidy. In accordance with this scheme, the assessee granted loans to its customers at a lower rate of interest and for the assessment years that we are concerned with, the export subsidy granted to the assessee was to the extent of Rs. 23,37,224 for the asst. yr. 1981 -82, Rs. 59,88,360 for the asst. yr. 1982 -83 and Rs. 74,92,486 for the asst. yr. 1983 -84.

(3.) ACCORDING to learned counsel for the Revenue, this amount was taxable under the Interest -tax Act, 1974, being interest received by the assessee. However, the contention of the assessee was that this was export subsidy received by it and was not interest. Therefore, it was not taxable under the Interest -tax Act, 1974. The view canvassed by the assessee was not accepted either by the AO or the CIT(A) or by the Tribunal.