IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN WEDNESDAY, THE 4TH JUNE 2008 / 14TH JYAISHTA 1930 ITA.No. 297 of 2002() --------------------- TA.7/COCH/1998 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT ------------------------------------ THE COMMISIONER OF INCOME TAX, TRICHUR BY ADV. SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENTS: RESPONDENT ----------------------- THE CATHOLIC SYRIAN BANK LTD.,TRICHUR. BY ADV. SRI.SARANGAN (SR.) BY ADV. SRI.K.VINOD CHANDRAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 04/06/2008, THE COURT ON 04/06/2008 DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & V.K.MOHANAN, JJ. .................................................................... I.T. Appeal No.297 of 2002 .................................................................... Dated this the 4th day of June, 2008. JUDGMENT Ramachandran Nair, J. Heard Senior counsel appearing for the Income Tax department and Senior counsel Sri.Sarangan appearing for the respondent. The question raised is whether assessee is liable to pay interest tax under the Interest Tax Act on the interest received on Government securities. While counsel for the assessee referred to the decision of the Karnataka High Court in COMMISSIONER OF INCOME-TAX V. VIJAYA BANK (2006) 285 ITR 97 rendered in the case of three Banks which is confirmed by the Supreme Court in COMMISSIONER OF INCOME-TAX V. CORPORATION BANK (2007) 295 ITR 193, Senior counsel for the Revenue referred to the two decisions of the Bombay High Court in DISCOUNT & FINANCE HOUSE OF INDIA LTD. V. S.K.BHARDWAJ, C.I.T. & OTHERS (2003) 259 ITR 295 and in COMMISSIONER OF INCOME-TAX V. UNITED WESTERN BANK LTD. (259 ITR 312) wherein the Bombay High Court has left open the liability for interest under the Interest Tax Act on securities held as current assets by the Banks. He specifically referred to the decision 2 of the Supreme Court and contended that the decision applies only to dated securities. However, Senior counsel appearing for the assessee contended that the decision affirmed by the Supreme Court is that of the Karnataka High Court which has dealt with all Government securities and not only dated securities. We do not think there is any difference between dated securities and other securities for the purpose of levy of tax under the Interest Tax Act because tax on interest is payable only on loans and advances. The securities of Reserve Bank of India and Government of India are in the nature of investment, the interest wherefrom is held not taxable under the Interest Tax Act by the Karnataka High Court. Sicne the decision of the Karnataka High Court is upheld by the Supreme Court in the decision abovereferred, we dismiss this appeal following the said decision. C.N.RAMACHANDRAN NAIR Judge V.K.MOHANAN Judge pms