Commissioner of Income Tax vs Corporation Bank

Leave granted in special leave petitions.

The short point which arises in this batch of civil appeals is whether interest earned by the assesses-banks on dated Government securities was liable to be assessed u/s 2(7) read with Section 4 of the Interest Tax Act, 1974. In our view, there is a basic difference between loans and advances on the one hand and investments/securities on the other. This difference is indicated in the provisions of the Income Tax Act, the Companies Act as well as the Banking Regulation Act. These aspects have been discussed in detail in two decisions of the Bombay High Court, namely, Discount and Finance House of India Ltd. Vs. S.K. Bhardwaj, Commissioner of Income Tax and Others, , as also in another decision of the Bombay High Court reported in Commissioner of Income Tax Vs. United Western Bank Ltd., in the case of CIT v. United Western Bank Ltd. It is not in dispute that the revenue has accepted the aforestated two judgments of the Bombay High Court. We are in agreement with the view expressed by the Bombay High Court.

For the aforestated reasons there is no merit in the civil appeals filed by the department. The same are dismissed. No order as to costs.