(a) Income-tax---

----Reference---Question decided by three High Courts---No appeal to Supreme Court in all three cases---Question cannot be referred---Indian Income Tax Act, 1961 , 5.256.

(b) Income-tax---

----Reference---Interest-tax---Interest---Finding of Tribunal that transaction by Bank of borrowing money from Agricultural Development and Refinance Corporation and Industrial Development Bank of India and lending it to its constituents constituted an integrated transaction-- Finding of fact---Tribunal justified in holding that only net interest was taxable---No question of law arose from its order---Indian Income Tax Act, 1961, S.256---Indian Interest Tax Act, 1974.

Held, (i) that in respect of the sum of Rs. 19,726 the order of the Tribunal was in accordance with the law that had been declared in three decisions, viz., CIT v. State Bank of Indore (1988) 172 ITR 24 (MP); CIT v. Canara Bank (1989) 175 ITR 60 (Kar.) and CIT v. Federal Bank Ltd. (1991) 189 ITR 117 (Ken.). It was not the case of the Revenue that any of those decisions bad-been taken up in appeal to the Supreme Court or that in any other matter the ratio laid down in the aforementioned decisions had been reversed by the Supreme Court. In the circumstances, it was unnecessary to call for a reference merely for the purpose of reiterating the law which had been declared and also accepted the Revenue.

(ii) That as regards the second question, the Tribunal had found that the transaction was as integrated one. The monies lent by the assessee bank to its constituents were monies which originated from the Industrial Development Bank of India which in turn had been made available to the Agricultural Development Refinance Corporations on certain conditions for the purpose of making the monies available through banks. The interest had to be paid by the ultimate borrowers as also by the tending Bank, as stipulated in the agreement. The assessee bank had entered into an agreement with the Agricultural Development Refinance Corporation and the, I.D.B.I. in accordance with the agreement that was entered into between the Agricultural Development Refinance Corporation and the I.D.B.I. The transaction commencing from the I.D.B.I. to the ultimate borrower was in the circumstances an integrated transaction. The Tribunal was justified in holding that only the net interest that accrued to the assessee-bank should be brought to tax. No question of law arose from its order.

CIT v. Canara Bank (1989) 175 ITR 601 (Kar); CIT v Federal Bank Ltd. (1991) 189 ITR 117 (Ken.) and CIT v. State Bank of Indore (1988) 172 ITR 24 (MPj ref.

C. V. Rajan for the Commissioner. R. Janakiraman for the Assessee.

JUDGMENT

R. JAYASIMHA BABU, J.---Counsel for the Revenue has Laced before us the following two questions as reframed by him, which submits are questions which require consideration by this Court:

"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in deleting the additions of Rs.19,726 and Rs.1,01,301 made to the chargeable interest as per the order of the Commissioner of Income-tax under section 19 of the Interest Tax Act, 1974?

(2) Whether the Appellate Tribunal was right in holding that the transaction between the assessee and the Agricultural Development Refinance Corporation and the Industrial Development Bank of India and the transaction of lending of money by the assessee-bank to its constituents should be viewed as one integrated transaction and only the net interest accrued to the assessee should be brought to tax?"

As regards the first question, it is fairly submitted by learned Counsel for the Revenue that in respect of the sum of Rs.19,726 the order of the Tribunal is in accordance with the law that has been declared in three decisions, viz. CIT v. State Bank of Indore (1988) 172 TR 24 (MP); CIT v. Canara Bank (1989) 175 ITR 601 (Kar.) and CIT . Federal Bank Ltd. (1991) 189 ITR 117 (Ker.).

It is not the case of the Revenue that-any of those decisions have been taken up in appeal to the Supreme Court or that in any other matter the ratio laid down in the aforementioned decisions has been reversed by the Supreme Court. In the circumstances, we deem it unnecessary to call or a reference merely for the purpose of reiterating the law which has been declared and also accepted by the Revenue.

As regards the second question, the Tribunal has found that the transaction is an integrated one. The monies lent by the bank to its constituents being monies which originated from the Industrial development Bank of India which in turn had been made available to the agricultural Development Refinance Corporation on certain conditions or the purpose of making the monies available through banks. The Interest has to be paid by the ultimate borrowers as also by the lending yank, as stipulated in the agreement. The assessee-bank has entered into n agreement with the A.D.R.C. and the I.D.B.I. in accordance with the agreement that was entered into between the Agricultural Development to finance Corporation and the Industrial Development Bank of India. The transaction commencing from the I.D.B.I. to the ultimate borrower s in the circumstances an integrated transaction.

The Tribunal has, therefore, in that background held that the interest received by the lending bank from the constituents for the monies lent by the bank from and out of the monies made available to it by the A.D.R.C. and the I.D.B.I. did not in its entirety accrue to the lending bank. It was in that sense the lending bank was functioning as an agent for that part of the interest that had to be paid to the A.D.R.C. and the I.D.B.I. and the sum of Rs. 1,01,301 referred to in the first question is the amount so paid.

We, therefore, do not deem it necessary to call for a reference. Tax case petition is dismissed.

M.B.A./745/FC

Petition dismissed.