Section 2(7), read with section 4, of the Interest-tax Act, 1974.
Commissioner of Income-Tax
CIVIL APPEAL NOS. 1770 TO 1773, 2188 TO 2191, 2646, 3047 OF 2006 AND 138, 3186 & 3187 OF 2007
DECIDED ON 19-7- 2007.
1. Leave granted in special leave petitions.
2. The short point which arises in this batch of civil appeals is whether interest earned by the assessee-banks on dated Government securities was liable to be assessed under section 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 & Finance House of India Ltd. v. S. K. Bhardwaj, CIT  259 ITR 2951, as also in another decision of the Bombay High Court in the case of CIT v. United Western Bank Ltd.  259 ITR 3122. 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.