Interest on Non-SLR securities of banks is falling under the head “Profit and Gains of Business or Profession”

CIRCULAR NO. 18/2015


Government of India

Ministry of Finance

Directorate of

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

 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Courts/Tribunals may be withdrawn / not pressed upon.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.



(D S Chaudhry)


New Delhi


Copy to:

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


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