M/S. State Bank Of Patiala ... vs Commr.Of Income Tax,Patiala

The Supreme Court addressed the interpretation of 'interest' under Section 2(7) of the Interest Tax Act, 1974, determining that compensation paid by banks for delayed payments on discounted bills of exchange does not qualify as 'chargeable interest' for tax purposes. The Court held that the definition of 'interest' is exhaustive and does not encompass such compensation, aligning with the views of several High Courts while differing from others. Consequently, the appeals were decided in favor of the banks, affirming that the compensation is not taxable under the Act.