COMMISSIONER OF INCOME TAX vs. M/S PNB CAPITAL SERVICES LTD.
What did the High Court hold?
The Delhi High Court held that the issue regarding the taxability of interest on Government Securities and PSU Bonds under the Interest Tax Act, 1974, as amended, has been conclusively decided by the Supreme Court in the case of Commissioner of Income Tax v. Sahara India Savings and Investments Corporation Limited, 321 ITR 371 (SC). In that judgment, the Apex Court ruled that such interest is not exigible to tax under the Interest Tax Act, 1974, as amended. Therefore, following the precedent set by the Supreme Court, the High Court dismissed the appeal filed by the Revenue. No other issues were decided, and no specific relief was granted other than dismissing the appeal.
What were the facts?
The Commissioner of Income Tax (Appellant) filed an appeal before the Delhi High Court against an order passed by the Income Tax Appellate Tribunal (ITAT). The appeal pertains to Assessment Year 2001-02. The dispute concerns the taxability of interest earned on Government Securities and Public Sector Undertakings (PSU) Bonds under the Interest Tax Act, 1974, as amended by the Amending Act, 1991. The ITAT had ruled that this interest was not exigible to tax. The appeal was admitted on a substantial question of law.
What were the issues?
1. Whether the Income Tax Appellate Tribunal was correct in law in holding that the interest on Government Securities and Public Sector Undertakings Bonds is not exigible to tax under the Interest Tax Act, 1974 as amended by the Amending Act, 1991? Assessee's Contentions: The judgment does not record any specific contentions made by the assessee (M/s PNB Capital Services Ltd.). Revenue's Contentions: The Revenue, represented by the Commissioner of Income Tax, argued that the interest on Government Securities and PSU Bonds was exigible to tax under the Interest Tax Act, 1974, as amended. However, the Revenue's counsel fairly submitted that the issue has been decided by the Supreme Court in Commissioner of Income Tax v. Sahara India Savings and Investments Corporation Limited 321 ITR 371 (SC), which held that such interest is not exigible to tax under the said Act.
Which sections of the Income-tax Act were involved?
Interest Tax Act, 1974
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
O R D E R %
2026
The present appeal was admitted on 06.02.2006 on the following substantial question of law:- “Whether the Income Tax Appellate Tribunal was correct in law in holding that the interest on Government Securities and Public Sector Undertakings Bonds is not exigible to tax under the Interest Tax Act, 1974 as amended by the Amending Act, 1991?”
Mr. Shlok Chandra, learned Senior Standing Counsel for the appellant at the outset fairly submits that this issue has been decided by Hon’ble the Supreme Court in Commissioner of Income Tax v. Sahara This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 14/05/2026 at 12:11:25
India Savings and Investments Corporation Limited 321 ITR 371 (SC) in which the Apex Court held that Government Securities and PSU Bonds could not be exigible to tax under the Interest Tax Act, 1974 as amended.
Since the issue has attained finality, the appeal is dismissed in terms of the judgment aforesaid.
DINESH MEHTA, J
AMIT MAHAJAN, J MAY 8, 2026/dd
This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 14/05/2026 at 12:11:25
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