COMMISSIONER OF INCOME TAX Vs. NAINITAL BANK LTD

JUDGEMENT

(1.) THIS appeal under Section 260A of the Income -tax Act, 1961 has been preferred against the order dated November 25, 2004, passed by the Income -tax Appellate Tribunal, Lucknow, in Income -tax Appeal No. 4/Alld of 1999 for the assessment year 1995 -96, by which the Tribunal has dismissed the appeal filed by the Department.

(2.) THE brief facts of the case giving rise to this appeal are that in the computation of income the appellant (respondent herein) showed the interest on G. P. notes amounting to Rs. 5,45,31,276 which had not been included in the chargeable interest. The contention of the respondent was that interest on securities and bonds were outside the interest -tax Act as this was not interest on loans and advances. The Assessing Officer did not accept this contention and relying on the Board's Instruction No. 1923 dated March 14, 1995, as well as Notification No. S.O. 2557 dated September 11, 1995 (see [1996] 217 ITR 5), stated that any amount chargeable to income -tax under the head 'Interest on securities' was specifically excluded. This notification had specifically excluded 'interest on securities' received by the banking companies with effect from the assessment year 1996 -97. The Assessment Officer concluded that for the assessment year 1995 -96, 'interest on securities' was clearly taxable and, therefore, interest on G.P. notes amounting to Rs. 5,45,31,276 was included in the interest chargeable in the hands of the respondent.

(3.) WE have heard learned Counsel for the parties. The following question of law arises for the assessment year 1995 -96 :