THE COMMISSIONER OF INCOME TAX, KOLHAPUR vs. ICICI BANK LTD.

CIVIL APPEAL No. 7441/2004Supreme Court[2008] 14 S.C.R. 37713 October 2008Bench: 2 JudgesAuthor: ARIJIT PASAYAT, MUKUNDAKAM SHARMA4 pages
AI SummaryRemanded

What were the facts?

The appeals by the Commissioner of Income Tax (Revenue) challenged the Bombay High Court's judgment, which upheld the Income Tax Appellate Tribunal's decision. The Tribunal had ruled that interest earned by ICICI Bank Ltd. (Assessee) on government securities was not taxable under Section 2(7) of the Interest Tax Act, 1974. The Revenue contended that interest on securities, bonds, and debentures should be considered "Interest chargeable to tax" under Section 2(7) of the Interest Act. The Assessee supported the Tribunal and High Court's findings. The Supreme Court noted a similar issue was decided in Commissioner of Income Tax v. Corporation Bank, which dealt with interest on government securities. The Revenue disputed the Assessee's claim that the interest in this case was solely on government securities.

What did the Supreme Court hold?

The Supreme Court referred to its prior decision in Commissioner of Income Tax v. Corporation Bank (2008) 166 Taxman 388, which held that there is a fundamental distinction between loans and advances on one hand, and investments/securities on the other. The Court agreed with the Bombay High Court's view in that case, which was accepted by the Revenue. The Supreme Court directed the Tribunal to examine the factual position to determine if the interest in the present case was indeed on government securities. If the interest earned was solely on government securities, the ratio of the Corporation Bank's case would apply. However, if the interest earned was not solely on government securities, the ratio of that decision would not be applicable. The appeals were disposed of based on this factual determination to be made by the Tribunal.

What were the issues?

1. Whether the Tribunal and High Court were justified in holding that interest earned by the assessee on government securities was not liable to be assessed under Section 2(7) of the Interest Tax Act, 1974 (mixed question of law and fact, turning on the interpretation of Section 2(7) of the Interest Tax Act, 1974 and the nature of the securities). Assessee's contentions: Supported the Tribunal and High Court's judgment, implying that interest on government securities is not taxable under the relevant provisions. Revenue's contentions: Argued that the Tribunal and High Court erred in holding that loans and advances do not include interest on securities, bonds, and debentures, and therefore, such interest is not liable to tax under the Interest Act. Contended that interest on securities falls within the meaning of "Interest chargeable to tax" as defined under Section 2(7) of the Interest Act. Relied on the interpretation of Section 2(7) of the Interest Tax Act, 1974.

Which sections of the Income-tax Act were involved?

Section 2(7),Section 4,Section 260A,Section 24

AI-generated summary — verify with the full judgment below

[2008] 14 S.C.R. 377 THE COMMISSIONER OF INCOME TAX, KOLHAPUR II. ICICI BANK LTD. (Civil Appeal Nos. 7441-7443 of 2004) OCTOBER 13, 2008 [DR. ARIJIT PASAYAT AND DR. MUKUNDAKAM SHARMA, JJ.] A B Interest Tax Act, 1974 - s.2(7) - Interest on government securities - Taxability of - Held: In view of Supreme Court's c decision in Corporation Bank's case*, interest earned on gov- ernment securities was held not taxable - In the instant case, dispute between revenue and assessee as to whether, inter- est earned was on government securities -Factual position as to nature of interest involved required to be examined by 0 Tribunal. ~ The question which arose for consideration in these appeals is whether Tribunal and High Court were justi- fied in holding that the interest earned by assessee on the government securities was not liable to be assessed E under s.2(7) of the Interest Tax Act, 1974. Disposing of the appeals, the Court HELD: A similar question came up for consideration before Supreme Court in *Commissioner of Income Tax v. F - 4 Corporation Bank. The Revenue submitted that this deci- \ sion related to the interest on government securities. The assessee sub

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 2(7)

All 52 judgments and leading authorities on Section 2(7) →

Recent GST High Court judgments

Search GST case law →