COMMNR. OF INCOME TAX, KOLHAPUR vs INDUSTRIAL DEVELOPMENT BANK OF INDIA LTD

The Supreme Court addressed the issue of whether interest earned by banks on government securities is taxable under Section 2(7) of the Interest Tax Act, 1974. The Court upheld the Bombay High Court's decision, which aligned with the Income Tax Appellate Tribunal's ruling that such interest is not chargeable to tax, distinguishing between loans/advances and investments/securities. The appeals filed by the revenue were dismissed, with the Court indicating that the factual determination regarding the nature of the interest must be made by the Tribunal.