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                                                                             CIRCULAR NO. 18/2015

                                               F.N 0.2 79/Misc./140/20 IS/IT J
                                                   Govern ment of India
                                                    Ministry of Finance
                                                Directorate of Income-tax
                                                     Legal & Research
                                                           ******

                                                                        New Delhi , 2 nd November, 2015

                       Subject: Interest from Non-SLR securities of Banks - reg.

             It has been brought to the notice of the Board that in the case of Banks, field officers are
     taking a view that, "expenses relatable to investment in non-SLR securities need to be disallowed
     u/s 57(i) of the Act as interest on non-SLR securities is income from other sources."






     2.      Clause (id) of sub-section (1) of Section 56 of the Act provides that income by way of
     interest on securities shall be chargeable to income-tax under the head "Income from Other
     Sources", if, the income is not chargeable to income-tax under the head "Profits and Gains of
     Business and Profession" .

     3.      The matter has been examined in light of the judicial decisions on this issue. In the case of
     ClT Vs Nawanshahar Central Cooperative Bank Ltd. [2007] 160TAXMAN 48(SC), the Apex
     Court held that the investments made by a banking concern are part of the business of banking.
     Therefore, the income arising from such investments is attributable to the business of banking
     falling under the head "Profits and Gains of Business and Profession".

     3.2     Even though the abovementioned decision was in the context of co-operative societies /
     Banks claiming deduction under section 80P (2)(a)(i) ofthe Act, the principle is equally applicable
     to all banks/commercial banks, to which Banking Regulation Act, 1949 appl ies.






     4.      In the light of the Supreme Court's decision in the matter, the issue is well settled.
     Accordingly, the Board has decided that no appeals may henceforth be filed on this ground by the
     officers ofthe Department and appeals already filed, ifany, on this ground before Courts/Tribunals
     may be withdrawn / not pressed upon. Th is may be brought to the notice of all concerned.


                                                                                        ~,d---j
                                                                                        (D S Chaudhry)
                                                                                     CIT (A&J), CBDT,
                                                                                             New Delhi
     Copy to:
        I. The Chairperson, Members and officers of the CBDT of the rank of Under Secretary and
            above.


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