Commnr. Of Income Tax, Karnataka vs M/S. Canara Bank

The Supreme Court held that rediscounting interest paid on promissory notes does not constitute chargeable interest under Section 2(7) of the Interest-tax Act, 1974, as it arises from a diversion of title in favor of the Industrial Development Bank of India (IDBI). The Court clarified that the rediscounting charges collected by the assessee-bank from IDBI are not taxable as they do not accrue to the bank due to the overriding title of IDBI. Consequently, the appeals were dismissed, affirming the Tribunal's decision.