Circular No. 18/2015

Interest from non slr securities of banks reg.

What this is

Circular No. 18/2015 was issued by the Central Board of Direct Taxes on 2 November 2015. Its subject is Interest from non slr securities of banks reg.

What it does

Stops the disallowance of expenses relating to non-SLR securities in bank assessments. Field officers had been treating interest on non-SLR securities as income from other sources under clause (id) of sub-section (1) of section 56 and disallowing the related expenditure under section 57(i). The Board, following the Supreme Court in CIT v. Nawanshahar Central Cooperative Bank Ltd., that investments made by a banking concern are part of the business of banking so that the income from them is attributable to that business and falls under profits and gains of business or profession, treats the issue as settled. Departmental appeals on this ground are not to be filed henceforth, and those already filed before courts and tribunals are to be withdrawn or not pressed.

Why it was issued

It was brought to the Board's notice that field officers were taking the view that expenses relatable to investment in non-SLR securities must be disallowed under section 57(i), and the Board examined the position in the light of the judicial decisions.

Who it reaches

Commercial banks to which the Banking Regulation Act, 1949 applies
Co-operative banks and societies claiming deduction under section 80P(2)(a)(i)
Banks facing a disallowance of expenses relating to non-SLR investments

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.56	s.2, s.92
s.80P	s.2, s.149, s.150

The instrument, as the Board published it

The department publishes this one only as a PDF, so the words below were read out of that PDF by machine. That reading can carry its own mistakes — a misread number, a broken line. Check the signed document before you rely on a figure in it. The reading also stopped short of the end of the document: what is below is the opening, not the whole of it.

CIRCULAR NO. 18/2015
F.N 0.2 79/Misc./140/20 IS/IT J
Government of India
Ministry of Finance
Directorate of Income-tax
Legal & Research
******
New Delhi, 2nd November, 2015
Subject: Interest from Non-SLR securities of Banks - reg.

It has been brought to the notice of the Board that in the case of Banks, field officers are taking a view that, "expenses relatable to investment in non-SLR securities need to be disallowed u/s 57(i) of the Act as interest on non-SLR securities is income from other sources."

2. Clause (id) of sub-section (1) of Section 56 of the Act provides that income by way of interest on securities shall be chargeable to income-tax under the head "Income from Other Sources", if, the income is not chargeable to income-tax under the head "Profits and Gains of Business and Profession" .

3. The matter has been examined in light of the judicial decisions on this issue. In the case of CIT Vs Nawanshahar Central Cooperative Bank Ltd. [2007] 160TAXMAN 48(SC), the Apex Court held that the investments made by a banking concern are part of the business of banking. Therefore, the income arising from such investments is attributable to the business of banking falling under the head "Profits and Gains of Business and Profession".

3.2 Even though the abovementioned decision was in the context of co-operative societies / Banks claiming deduction under section 80P (2)(a)(i) of the Act, the principle is equally applicable to all banks/commercial banks, to which Banking Regulation Act, 1949 applies.

4. In the light of the Supreme Court's decision in the matter, the issue is well settled. Accordingly, the Board has decided that no appeals may henceforth be filed on this ground by the officers of the Department and appeals already filed, if any, on this ground before Courts/Tribunals may be withdrawn / not pressed upon. This may be brought to the notice of all concerned.

Copy to:
~,d---j
(D S Chaudhry)
CIT (A&J), CBDT,
New Delhi

I. The Chairperson, Members and officers of the CBDT of the rank of Under Secretary and above.

What to watch

Clause (id) of section 56(1) charges interest on securities under other sources only if it is not chargeable as business income — for a bank it is business income, which is what takes it out of section 57(i).
Although the Supreme Court decision arose in the context of co-operative societies and banks claiming deduction under section 80P(2)(a)(i), the Board applies the principle to all banks to which the Banking Regulation Act, 1949 applies.
The circular directs the Department on appeals; it does not itself delete an addition already made, which must still be taken up in the pending proceeding.

Where you meet it

In a bank's scrutiny assessment where interest on non-SLR securities has been shifted to income from other sources and the related expenditure disallowed, or in a pending departmental appeal on that ground.

What it names

It mentions. Circular No. 18/2015

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Circular No. 15/2023 — Guidelines under clause 10D of section 10 of the income tax act 1961 16 August 2023
Notification No. 51/2023 [F. No. 370142/22/2023-TPL] / GSR 519(E) — Ministry of Finance 18 July 2023
Notification No. 29/2023 [F. No. 370142/9/2023-TPL (Part-I)] / SO 2274(E) — [भाग II—खण् ड 3(ii)] भारत का रािपत्र : असाधारण 3 24 May 2023
Notification No. 30/2023 [F. No. 370142/9/2023-TPL (Part-I)] / SO 2275(E) — Ministry of Finance 24 May 2023
Notification No. 91/2022 [F. No. 370142/31/2022-TPL (Part-2) / SO 3704(E) — Ministry of Finance 5 August 2022
Notification No. 92/2022 [F. No. 370142/31/2022-TPL (Part-2)] / SO 3705(E) — Ministry of Finance 5 August 2022

← Circular No. 19/2015 · Circular 16/2015 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.