COMMNR. OF INCOME TAX, KOLHAPUR vs RATNAKAR BANK LTD.

The Supreme Court upheld the Bombay High Court's decision that interest earned by banks on government securities is not chargeable to tax under Section 2(7) of the Interest Tax Act, 1974. The Court distinguished between loans and advances versus investments/securities, referencing the prior ruling in Commissioner of Income Tax v. Corporation Bank (2008). The appeals by the revenue were dismissed, affirming the Tribunal's view that such interest does not fall under taxable interest as defined in the Interest Act.