Commissioner of Income Tax vs Nicco Uco Alliance Credit Ltd., (Successors to Overseas Sanmar Financial Ltd.)

P.D. Dinakaran, J.—The above tax case appeal is directed against the order of the Income Tax Appellate Tribunal made in I.T.A. No.

63/Mds/2001, dated 10.3.2006 with reference to the assessment year 1997-98.

The Revenue is the appellant. The assessee is a leading non-banking finance company and for the assessment year 1997-98, it excluded the

overdue interest on bills from chargeable interest, which was disallowed by the assessing officer holding that such interest falls within the scope of

Section 2(7) of the Interest Tax Act and accordingly, added the same to the chargeable interest. Aggrieved over the same, the assessee preferred

appeal before the Commissioner of Income Tax (Appeals), who confirmed the action of the assessing officer. On appeal, at the instance of the

assessee before the Income Tax Appellate Tribunal, the Tribunal held the issue in favour of the assessee.

Exasperated, the Revenue has preferred this appeal by raising the following substantial question of law:

Whether in the facts and circumstances of the case, the Tribunal was right in excluding overdue interest on bills from the chargeable interest under

the Interest Tax Act ?

It is fairly conceded by the learned Counsel appearing for the Revenue that the issue raised in the above question is squarely covered against the

Revenue by the decision of Kerala High Court in Commissioner of Income Tax Vs. State Bank of Travancore, , wherein it is held as follows:

The character of an overdue bill is wholly distinct from loans and advances, and the interest on the loans and advances alone is taxable under the

Interest Tax Act. The character of an overdue bill is not synonymous with loans and advances. Therefore, the interest on overdue bills is to be

excluded from chargeable interest under the Interest Act, 1974.

That apart, this Court in T.C. No. 55 of 2006 (between the Commissioner of Income Tax v. Sundaram Finance Services Limited), following an

unreported decision of this Court in T.C. No. 73 of 2000 (Commissioner of Income Tax, Madras v. Harita Finance Ltd., Madras) by judgment

dated 1.2.2006, held that the additional finance charges received by the assessee for delayed payment on bills, are not subject to interest tax.

In view of the above settled proposition of law, we hold that the interest received on overdue bills are not subject to interest tax.

Finding no substantial question of law arises for consideration, the appeals stand dismissed.