Ramachandran Nair, J v. C.n.ram

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN WEDNESDAY, THE 4TH JUNE 2008 / 14TH JYAISHTA 1930 ITA.No. 297 of 2002() --------------------- TA.7/COCH/1998 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT ------------------------------------ THE COMMISIONER OF INCOME TAX, TRICHUR BY ADV. SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENTS: RESPONDENT ----------------------- THE CATHOLIC SYRIAN BANK LTD.,TRICHUR. BY ADV. SRI.SARANGAN (SR.) BY ADV. SRI.K.VINOD CHANDRAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 04/06/2008, THE COURT ON 04/06/2008 DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR &V.K.MOHANAN, JJ. .................................................................... I.T. Appeal No.297 of 2002....................................................................Dated this the 4th day of June, 2008. JUDGMENT Ramachandran Nair, J. Heard Senior counsel appearing for the Income Tax department andSenior counsel Sri.Sarangan appearing for the respondent. The questionraised is whether assessee is liable to pay interest tax under the Interest TaxAct on the interest received on Government securities. While counsel forthe assessee referred to the decision of the Karnataka High Court inCOMMISSIONER OF INCOME-TAX V. VIJAYA BANK (2006) 285 ITR97 rendered in the case of three Banks which is confirmed by the SupremeCourt in COMMISSIONER OF INCOME-TAX V. CORPORATIONBANK (2007) 295 ITR 193, Senior counsel for the Revenue referred to thetwo decisions of the Bombay High Court in DISCOUNT & FINANCEHOUSE OF INDIA LTD. V. S.K.BHARDWAJ, C.I.T. & OTHERS (2003)259 ITR 295 and in COMMISSIONER OF INCOME-TAX V. UNITEDWESTERN BANK LTD. (259 ITR 312) wherein the Bombay High Courthas left open the liability for interest under the Interest Tax Act on securitiesheld as current assets by the Banks. He specifically referred to the decision of the Supreme Court and contended that the decision applies only to datedsecurities. However, Senior counsel appearing for the assessee contendedthat the decision affirmed by the Supreme Court is that of the KarnatakaHigh Court which has dealt with all Government securities and not onlydated securities. We do not think there is any difference between datedsecurities and other securities for the purpose of levy of tax under theInterest Tax Act because tax on interest is payable only on loans andadvances. The securities of Reserve Bank of India and Government of Indiaare in the nature of investment, the interest wherefrom is held not taxableunder the Interest Tax Act by the Karnataka High Court. Sicne the decisionof the Karnataka High Court is upheld by the Supreme Court in the decisionabovereferred, we dismiss this appeal following the said decision. C.N.RAMACHANDRAN NAIRJudge pms V.K.MOHANANJudge