In the case of Bank of Rajasthan Ltd. vs. Commissioner of Income Tax, the Supreme Court tended to key issues with respect to the treatment of broken period intrigued in keeping money and tax collection things. The Court's judgment on October 16, 2024, centered on whether banks may claim conclusions for intrigued paid amid the period between the final intrigued installment and the date of buy of government securities. This sort of intrigued, known as broken period intrigued, was a critical point of dispute between banks and charge specialists.
The case stemmed from the reality that banks, counting the Bank of Rajasthan, buy government securities that are required for keeping up the Statutory Liquidity Ratio (SLR). The intrigued on these securities is paid occasionally, and when banks acquire them mid-period, they got to pay for both the security and the intrigued that has collected since the final installment date. Banks contended that this broken period intrigued ought to be deducted as a trade cost when calculating their assessable pay, as the securities are treated as stock-in-trade.
Tax authorities, citing past rulings, contended that broken period interest should be considered capital expenditure rather than revenue expenditure. The Supreme Court had to decide whether the interest paid could be permitted as a deduction and whether the verdict in the Vijaya Bank Ltd. vs. Additional Commissioner of Income Tax case was still valid following the Income Tax Act revisions.
Finally, the Court determined that the broken period interest was a legitimate business expense that could be deducted from taxable income. This decision reaffirmed the practice followed by banks and provided clarity on the treatment of government securities in the context of banking and taxation.
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