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Judgment
The Revenue has preferred this appeal u/s 260A of the Income Tax Act, 1961 (for short, "the Act") against order dated 9.1.2006 of the Income Tax Appellate Tribunal, Chandigarh Bench ''A'' in I.T.A.No.3/Chandi/2004 for the assessment year 1996-97, proposing to raise following substantial question of law:
Whether on the facts and circumstances of the case, the Hon''ble ITAT is right in holding that interest earned on refinancing operations is to be excluded from the taxable interest?
The assessee received income from interest on the loans advanced. Interest was passed on to IDBI and SIDBI under Refinancing Scheme. However, the said income was added to the income of the assessee. The CIT(A) following judgment of the Kerala High Court in Commissioner of Income Tax Vs. State Bank of Travancore, , held that interest paid to IDBI and SIDBI under Refinancing Scheme was permissible deduction. The findings of the CIT(A) are as under:
2.6. The submissions of the appellant have been considered carefully and I have gone through the agreement between the appellant and IDBI/SIDBI as wel as the judgment of the Hon''ble Kerala High Court, cited supra. The appellant is a financial institution as well as credit institution and is providing finance for setting up industrial projects within the State of Punjab. The appellant in order to finance these projects, entered into a further agreement with IDBI/SIDBI for refinancing of the projects. As per the terms of the refinancing scheme where assistance is provided by IDBI/SIDBI to the appellant, it is clear that IDBI/SIDBI has overriding title to the interest received from the industrial concerns. In fact, IDBI/SIDBI have first claim over the amounts received from the industrial concerns. The amounts received by the PSIDC from the IDBI have to be passed on to the borrower for whom it is sanctioned. After going through the agreements entered into between the IDBI and the PSIDC in 1984 and 1995, I have come to the conclusion that the real financing institution for the major part of the loan is IDBI/SIDBI for all practical purposes. The decision of the Hon''ble Kerala High Court in the case of Commissioner of Income Tax Vs. State Bank of Travancore, is squarely applicable to the facts of this case. In light of the above facts, it is held that the interest earned on refinance operations is not includible in the chargeable interest under the Interest Tax Act. Therefore, the Assessing Officer has erred in subjecting to tax the interest amounting to Rs. 12,27,10,261/- paid to the IDBI/SIDBI under the Interest Tax Act. Accordingly, the Assessing Officer is directed to recompute the chargeable interest after excluding the interest of Rs. 12,27,10,261/-.
The above findings have been affirmed by the Tribunal.
We have heard learned Counsel for the appellant.
Interest income earned by the assessee has been held to be adjustable towards the interest paid to the IDBI and SIDBI under Refinancing Scheme. The view of the Tribunal is consistent with the view taken by the Kerala High Court in CIT v. State Bank of Travancore (supra).
We are of view that in these circumstances, no substantial question of law arises.
There is another aspect in this appeal. There is delay of 945 days in refiling the appeal. In application for condonation, grounds mentioned are as under:
That the abovesaid appeal was filed in this Hon''ble Court on 12.06.2006. However, the registry of this Hon''ble Court raised certain objections on 29.06.2006.
That after the objection has been raised, the clerk of the then Counsel could not locate the case file from the registry of this Hon''ble Court. The case file has only now been located and the appeal has been refiled after removing the objections raised therein.
That delay has been caused inadvertently and only due to the reasons mentioned above.
The above averments show that there is gross negligence in pursuing the appeal filed by the department. The explanation for delay cannot be accepted as valid. We do not find any ground to condone delay of 945 days on the grounds raised. Even on merits, we have not found any case for interference.
The appeal is dismissed.