COMMISSIONER OF INCOME TAX Vs. INDIAN OVERSEAS BANK

JUDGEMENT

(1.) THE principal question referred to us at the instance of the revenue in all these tax cases concerns the taxability under the Income Tax Act, 1961, of interest on sticky loans in cases where the assessee is a bank.

(2.) AS long back as on 25-8-1924, the Central Board under the Indian Income Tax Act, 1922, had directed, as a result of the conclusions arrived at in the conference of the Income Tax Commissioners, that the interest accruing to money lenders who entered the same into a suspense account because of the extreme unlikelihood of recovery of the loan, need not be included in the assessee's taxable income. That circular was extended to banks by the circular dated 6-10-1952, which reads as under :