COMMISSIONER OF INCOME TAX, BOMBAY versus M/S. BANQUE NATIONALE DE-PARIS

Citation: [1997] 3 S.C.R. 216 · Decided: 21-03-1997 · Supreme Court of India · Bench: S.C. AGRAWAL · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
COMMISSIONER OF INCOME TAX, BOMBAY 
v. 
MIS. BANQUE NATIONALE DE-PARIS 
MARCH 21, 1997 
[S.C. AGRAWAL AND G.B. PATTANAIK, JJ.) 
Super Profits Tax Act, 1963/Super Profits Act, 1963/Income Tax Act, 
1961-Clauses VI and X of Rule 1 of the First Schedule-Section 14-Clauses 
VI and X of Rule 1 of the First Schedule-Income de1ived by the non-resident 
C company as interest from the govemment secwitie~Held: 77ie amount would 
be included for computing chargeable profits in accordance with clause VI of 
Rule I of the Fii:H Schedule of the Super Profits Tax Act, the same being an 
income liable to tax under the head "income from interest on secwities" under 
Section 14 of the Income Tax Act. 77ie character and incidence oftliat income 
D is not altered merely because it is eamed by a non-resident company-Hence 
Clause X of Rule I would not be allracted and the amount would not be 
deducted for the pwpose computing chargeable profits. 
E 
F 
The assessee, a 'non-resident' company challenged the super profits 
tax assessment made by the department including the amount received by 
it towards government securities, contending that the assessee was entitled 
to exclusion of the amount in computing chargeable profits in accordance 
with clause X Rule 1 of the First Schedule of the Super profits Tax Act, 
1963. The assessee also claimed deduction of the entire amount of interest 
received by it during the relevant period on advances given to the Indian 
concern. The Super Profit Tax Officer rejected both the claims. On appeal 
the Assistant Appellate Commissioner accepted the claims of the assessee 
with certain modifications. 
The department filed appeal before the Tribunal contending that 
clause X Rule 1 of the First Schedule would not apply to the interest on 
G government securities and it would fall under Clause VI of Rule 1 of the 
first Schedule. The Tribunal rejected the contention holding that interest 
received by a non-resident company either from government or local 
authority or any Indian concern would be deductible under Clause X of 
the Rule 1 of the First Schedule and dismissed the appeal. 
H 
On reference, the High Court also answered the questions in favour 
216 
C.I.T. v. BANQUE NATIONALE DE-PARIS 
217 
of the assessee. Hence the present appeal by the Revenue. But the Revenue A 
did not press at the time of final hearing, the second question regarding 
deduction of the amount of interest earned by the assessee on advances 
given to. Indian concern. 
Allowing the appeal, this Court 
HELD : 1. In the matter of computation of chargeable profits of the 
assessee for the purpose of levy of super profits tax under the provisions 
B 
of Super Profits Tax Act, 1963 from the total income of the assessee, the 
assessee would be entitled to the adjustment of the amount received as 
interest on securities derived from any security of the Central Government C 
or the State Government as per Clause VI of Rule 1 of the First Schedule 
of the Super Profits Tax Act in as much as the said amount is "interest on 
securities" which was in force at the relevant period and not under Clause 
X of Rule 1 of the First Schedule of the Act as held by the High Court. 
Clause X provides for an additional deduction to be made in case of a 
non-resident company if the said company has derived any income by way D 
of interest which it received from government or local authority or any 
Indian concern which is not covered by Clause VI. The Income derived by 
the assessee as interest from the government securities being an income 
liable for tax under the head "income derived by the assessee as interest 
from the government securities" being an income liable for tax. Under the E 
head "Income from the interest on securities" under section 14, of the 
Income Tax Act, the character and incidence of that income is not altered 
merely because it is earned by a non- resident company. [225-D-F; B-C] 
United Commercial Bank Ltd. v. CIT, West Bengal, ITR (1957) 688, 
referred to. 
F 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6087 of 
1983. 
From the Judgment and Order dated 30.1.79 of the Bombay High G 
Court in l.T.R. No. 86 of 1970. 
Dr. V. Gauri Shankar, C. Radha Krishna, B.S. Ahuja and B. Krishna 
Prasad for the Appellant. 
S. Ganesh, Mrs. AK. Verma, for JBD & Co., for the Respondent 
H 
218 
SUPREME COURT REPORTS 
(1997) 3 S.C.R. 
A 
The Judgment of the Court was delivered by 
PATIAi'IAIK, J. : This appeal by special leave is against th

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