COMMISSIONER OF INCOME TAX Vs. NEDUNGADI BANK LIMITED

JUDGEMENT

(1.) AT the instance of the Revenue, the following question of law has been referred by the Income-tax Appellate Tribunal (in short, "the Tribunal") for the decision of this court:

(2.) THE respondent is a banking company. We are concerned with the assessment years 1977-78 and 1978-79. While completing the assessments for the above two assessment years for which the accounting periods ended on December 31, 1976 and December 31, 1977, respectively, the rediscounting charges paid to the Industrial Development Bank of India, amounting to Rs. 2,05,258 and Rs. 3,20,378, respectively, for the above two assessment years were not allowed as deductions from the gross receipts on the ground that they were only application of interest after receipt and not a diversion before accrual. Similarly, the commission received on purchase of inland bills amounting to Rs. 11,49,907 and Rs. 11,22,417, respectively, were included by the Income-tax Officer in the chargeable interest for the above years, treating the same as discount on bills of exchange drawn or made in India coming within the definition of "interest" in the Interest-tax Act. In the appeals, the Commissioner of Income-tax (Appeals) followed the order of the Tribunal in I. T. A. Nos. 3 (Coch/1978-79, dated, March 20, 1981, and held that the aforesaid amounts were not includible in the chargeable interest. I. T. A. No. 3(Coch)/1978-79 is a case where the Federal Bank Limited was a party. In the further appeals at the instance of the Revenue, the Tribunal concurred with the decision of the Commissioner of Income-tax (Appeals). THE appeals filed by the Revenue were dismissed. It is, thereafter, at the instance of the Revenue that the Tribunal has referred the above question of law for the decision of this court.

(3.) A copy of this judgment under the seal of this court and the signature of the Registrar will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.