JUDGMENT : K.S. Jhaveri, J. 1. These Tax Appeals involve identical questions on law and were ordered to be heard together vide order dated 26.08.2009 passed in Tax Appeal Nos. 1605/2008 & 1606/2008. Therefore, they are decided by this common judgment. 2. Tax Appeals No. 1605/2008 and 1606/2008 were admitted on the following substantial questions of law; "(1) Whether on the facts and circumstances of the case, the Appellate Tribunal was justified in law in deleting the addition on the ground that there was no justification to adopt the accrual basis to compute chargeable interest under the Interest Tax Act, 1974? (2) Whether on the facts and circumstances of the case, the Appellate Tribunal was justified in law in deleting the addition on the ground that the investment in debentures could never be equated with the advancement of loans made in India? (3) Whether on the facts and circumstances of the case, the Appellate Tribunal was justified in law in deleting the addition on the ground that the Interest Tax is chargeable on interest received? (4) Whether on the facts and circumstances of the case, the Appellate Tribunal was justified in law in deleting the addition on the ground that the shape of upfront fees can not be equated as interest on loan and advances? (5) Whether on the facts and circumstances of the case, the Appellate Tribunal was justified in law in deleting the addition on the ground that the scrutiny cum service charges can not be equated as interest on loan and advances?" 3. Whereas, Tax Appeal No. 141/2009 was admitted in terms of the following substantial question of law: "Whether on the facts and circumstances of the case, the Appellate Tribunal was justified in law in deleting the addition of Rs. 19,20,85,303/- on the ground that there was no justification to adopt the accrual basis to compute chargeable interest under the Interest Tax Act, 1974?" 4. For the purpose of this judgment, Tax Appeal No. 1605/2008 is taken as the lead matter. The original assessment was completed u/s. 8(2) of the Interest Tax Act, 1974 on total chargeable interest of Rs. 117,65,19,365/-, which was reduced by the CIT(A) to Rs. 60,33,88,877/- vide order dated 16.04.2001. Subsequently, the Assessing Officer noticed that the assessee had failed to consider interest of Rs. 17,17,21,381/- on non-performing assets as chargeable interest and has credited the same to interest suspense account. 117,65,19,365/-, which was reduced by the CIT(A) to Rs. 60,33,88,877/- vide order dated 16.04.2001. Subsequently, the Assessing Officer noticed that the assessee had failed to consider interest of Rs. 17,17,21,381/- on non-performing assets as chargeable interest and has credited the same to interest suspense account. Notice u/s. 10 of the Interest Tax Act was issued and assessment was completed u/s. 8(2)on the total chargeable interest of Rs. 134,82,40,746/-. 5. Aggrieved by the assessment, the assessee preferred appeal before the CIT(A), who reduced the chargeable interest to Rs. 60,33,88,877/-, vide order dated 11.09.2003. Being aggrieved by the order of CIT(A), appeal was preferred before the Tribunal. However, the Tribunal partly allowed the appeal of Revenue, only for statistical purposes, vide order dated 28.12.2007. Hence, this appeal. 6. The question No. (1) in Tax Appeal No. 1605/2008 and 1606/2008 is similar to the sole question raised in Tax Appeal No. 141/2009. The said question is already settled by the judgment of Apex Court in the case of Kerala State Industrial Development Corporation Limited v. Commissioner of Income-tax, [2003] 259 ITR 51 ([2003] 128 Taxman 29 SC). In that case, the assessee, a Corporation under the control of the State Government, was following mercantile system of accounting for interest payments and cash system for interest receipts. The Assessing Officer, in view of Section 5, made the computation of the interest on accrual basis. The Assessing Officer applied provisions of Section 145 of the Income-tax Act incorporated in Section 21 of the Interest-tax Act and observed that under the method of accounting adopted by the assessee, true and correct picture of income earned could not be found. The CIT(A) as well as the Tribunal upheld the conclusion of the Assessing Officer. The High Court while upholding the order of the Tribunal held that the "chargeable interest" in terms of Section 5 was the total amount of interest accruing in relevant previous year and that there was no scope in the section to read "chargeable interest" as meaning the amount actually received in the relevant previous year. On this set of facts, the Apex Court held that in arriving at the conclusion, the High Court had overlooked the opening words of Section 5, which make the provisions of the said section "subject to the provisions of the Act". On this set of facts, the Apex Court held that in arriving at the conclusion, the High Court had overlooked the opening words of Section 5, which make the provisions of the said section "subject to the provisions of the Act". The other provisions of the Act include Section 21 whereunder provisions of certain specified sections and schedule of the Income-tax Act have been made applicable with necessary modifications as if the said provisions referred to the Interest-tax Act instead of the Income-tax Act. At the material time, Section 145 of the Income-tax Act was incorporated in the Interest-tax Act by virtue of Section 21 of that Act. Section 145 of the Income-tax Act permits income chargeable under the head 'Profits and gains of business or profession' or 'Income from other sources' to be computed in accordance with either the cash or mercantile system or accounting, as may be regularly employed by the assessee. The assessee had followed the cash system of accounting in respect of the interest income. Therefore, section 5 of the Interest-tax Act would in the circumstances allow the circulation or computation of chargeable interest on the basis of the amount of interest actually received. Learned Standing Counsel Mr. Mehta could not point out any distinguishing feature, which may warrant a different view. In view of the aforesaid, Question No. (1) raised in Tax Appeal Nos. 1605/2008 and 1606/2008 and the sole question raised in Tax Appeal No. 141/2009 are answered in favour of the assessee and against the Revenue. 7. Insofar as question No. (2) raised in Tax Appeal Nos. 1605/2008 & 1606/2008 is concerned, the same is also settled by the judgment of Apex Court in the case of Commissioner of Income-tax v. Sahara India Savings and Investment Corporation Ltd., [2010] 321 ITR 371 (SC) wherein, it has been held that for the purpose of the Interest-tax Act, 1974, interest on loans and advances will not cover interest on bonds and debentures bought by an assessee as and by way of "investment" under Section 2(7). Reading section 2(7) as a whole, it is clear that "interest on investments" is not taxable as interest u/s. 2. Reading section 2(7) as a whole, it is clear that "interest on investments" is not taxable as interest u/s. 2. The directions of the Reserve Bank of India in the Residuary Non-Banking Companies (Reserve Bank) Directions, 1987, in paragraph 6 providing security for depositors in a residuary non-banking company is to protect the interests of the public who are investing in fixed deposits with non-banking companies. When the assessee buys bonds and debentures of approved nature, they constitute investment and cannot be treated as loans and advances and therefore, interest on such investment cannot be taxed under the Interest-tax Act, 1974. 8. The above decision of the Apex Court has been followed by this Court in a decision rendered in Tax Appeal Nos. 1523/2005 to 1528/2005 dated 24.08.2006 in respect of the same assessee wherein, question No. (1) pertained to this issue. In view of the aforesaid, Question No. (2) raised in Tax Appeal No. 1605/2008 & 1606/2008 is answered in favour of the assessee and against the Revenue. 9. Insofar as Question Nos. (3) to (5) are concerned, the same are already settled by the judgment of this Court rendered in Tax Appeal Nos. 1523/2005 to 1528/2005 dated 24.08.2006, which is reproduced hereunder for ready reference: "The following substantial questions of law are proposed for admission of these appeals. (1) Whether the Appellate Tribunal is right in law in holding that the interest on debentures cannot be equated with advancement of loans and thereby, not chargeable to Interest Tax under the Interest Tax Act, 1974 ? (2) Whether the Appellate Tribunal is right in law and on facts in holding that the respondent is liable to interest tax only on the net interest received by it and not the gross interest? (3) Whether the Appellate Tribunal is right in law and on facts in excluding the amount of upfront fees and other income received by the respondent in calculating the chargeable interest under the Income Tax Act, 1974 ? (4) Whether the Appellate Tribunal is right in law in holding that the amounts given to other corporations would be deposits and the interest thereon would not be chargeable interest under the Interest Tax Act, 1974? So far as the Question No. 1 is concerned, the tribunal has considered the issue as under: "We find force in the contention of the Ld. Counsel. So far as the Question No. 1 is concerned, the tribunal has considered the issue as under: "We find force in the contention of the Ld. Counsel. Section 2(7) of the Income Tax Act defines as under: (7) "Interest" means interest on loans and advances made in India and includes- (a) commitment charges on unutilised portion of any credit sanctioned for being availed of India: and (b) discount on promissory notes and bills of exchange drawn or made in India; but does not include- (i) interest referred to in sub-section (IB) of Section 42 of the Reserve Bank of India Act, 1934 (2 of 1934): (ii) discount on treasury bills: (S) "prescribed" means prescribed by Rules made under this Act: (10) all other words and expressions used herein but not defined and defined in the Income-tax Act shall have the meanings respectively assigned to them in that Act. 9. Thus, investment in debenture could never be equated with the advancement of loans made in India. Hence, following the decision of ITAT, we find no merit in this ground of appeal, it is rejected in all the Asst. Years." So far as the Question No. 2 is concerned, the tribunal has considered the issue as under: "We have duly considered the rival contentions and perused the finding of the Ld. CIT (Appeal). The ITAT in the case of Karur Vyasys Bank Ltd. has held that loans given by the assessee to ultimate borrowers were part of an overall scheme laid down and controller by IDBI/SIDBI and the assessee has no discretion in respect of any part of the transaction, therefore, such transaction was considered as an integral and the interest accruing to the assessee was considered as arising from the entire transactions. It has been further held that the assessee is liable to interest tax only on the net interest received by it. Therefore, in view of that, we are of the opinion that the learned CIT (A) has deleted the addition after following a number of decisions. We find no error in the order of learned CIT (A). Hence, this ground of appeal is rejected in all the Asst. Therefore, in view of that, we are of the opinion that the learned CIT (A) has deleted the addition after following a number of decisions. We find no error in the order of learned CIT (A). Hence, this ground of appeal is rejected in all the Asst. Years." So far as the Question No. 3 is concerned, the tribunal has considered the issue as under: "Before us, the learned DR relied upon the order of Assessing Officer, whereas learned counsel for the assessee relied upon the finding of the learned CIT (A). On perusal of record, we find that amount received by the assessee in the shape of fees - cum - service charges cannot be equaled with interest as received on loan and advances. Therefore, in our opinion, the learned CIT (Appeals) has rightly observed that these charges are not in the nature of interest and not liable to be included in the chargeable interest. Hence, the learned CIT (Appeals) has rightly deleted the above additions, both the grounds in all the appeals are rejected." So far as the Question No. 4 is concerned, the tribunal has considered the issue as under: "In the Cross Objections, first grievance of the assessee relates inclusion of interest earned from deposits made with other Corporations/Finance Institutions. According to assessee, there is a distinction between loans and deposits. The interest earned from loan is only includable in the total chargeable interest as contemplated in the definition of "interest" provided in this Section 2(7) of the Interests Act. However, the learned Revenue Authorities below did not accept this contention of the assessee and included the interest from deposits with the Financial Institutions in the total chargeable interest of the assessee for the purpose of Interest Tax Act. However, the learned Revenue Authorities below did not accept this contention of the assessee and included the interest from deposits with the Financial Institutions in the total chargeable interest of the assessee for the purpose of Interest Tax Act. Before us, the learned counsel for the assessee relied upon three decisions of ITAT reported in 09 ITD 520(DEL) in the case of Oriental Insurance Co., 82 ITD 749 (Mum) in the case of Life Insurance Corporation and 87 ITD 11 (Del) in the case of Punjab National Bank wherein the Tribunal has pointed out disparity in expression 'Loans and Deposits' while discussing the difference of meaning in the expression 'Loans and Deposits', the Tribunal in the case of Oriental Insurance Co., v. DCIT reported in 89 ITD 520 (Del) (Supra) observed as under:- "In view of the above provisions, the case of the revenue is that deposits with banks and other institutions would fall within the ambit of the word 'loans'. While the case of the assessee is that 'loans' and 'deposits' are different expressions having different meanings and, therefore, interest on deposits is not chargeable to tax. Out study reveals that 'loans' and 'deposits' are not mutually exclusive terms inasmuch as (i) both are debts repayable (ii) in both the cases, money passes from one hand to another, (iii) in both the cases, there is relation of debtor and creditor; (iv) there is liability to return the money depending upon the terms and conditions between the parties. Still there is fine distinctions between the two. In the case of the deposit, it is made at the instance of the depositors whereas the loan is given at the instance of the borrower for his use with or without compensation. Consequently, the deposit is repayable only on demand by the depositors without the debtor having to seek out the creditor, while in the case of the loan, the obligation to repay is forthwith incur (though the obligation may have to be discharged in future) and the borrower must seek out the lender to repay the loan. Even the Legislature has made distinction between these two terms. Limitation Act prescribes the different period of limitation, i.e. three years from the date when the loan is made, while in the case of deposit, it is three years from the date when the demand is made. Even the Legislature has made distinction between these two terms. Limitation Act prescribes the different period of limitation, i.e. three years from the date when the loan is made, while in the case of deposit, it is three years from the date when the demand is made. Even the Income Tax Act, 1961, has made distinction between these two terms. Section 269SS prohibits acceptance of loan or deposits in cash exceeding the prescribed limit. Section 269T prohibits the repayment of the deposits in cash exceeding the prescribed limit. It is apparent from these provisions that repayment of the loan in cash is not prohibited. Consequently, no penalty is leviable under Section 271E where repayment of loan is made in cash. On the other hand, penalty is leviable under Section 271E, if deposit is repaid in cash exceeding the prescribed limit. Thus, it is apparent from these provisions that even the legislature has recognizes the distinction between the loan and deposit." Following the above decision, we find merit in this ground and we allow it. We direct the Assessing Officer to exclude the interest earned by assessee on the deposits made with the Financial Institutions while computing the total chargeable income of the assessee." The Tribunal has considered all the issues in light of the definition given in Clause (7) of Section 2 of the Interests Act. Considering the definition of interest given in the Interest Act, we see no infirmity in the order of the Tribunal. These appeals stand dismissed at admission stage." 10. Tax Appeal Nos. 104/2009 & 105/2009 were admitted by order dated 15.02.2010, which reads as under; "1. Leave to substitute the order of the learned Tribunal. 2. The Commissioner of Income Tax, Ahmedabad-II, Ahmedabad has filed two Tax Appeals under Section 260(A) of the Income Tax Act, 1961 for assessment year 1998-1999 and 1999-2000 proposing to formulate the following substantial questions of law for determination and consideration of this Court. Tax Appeal No. 104/2009 assessment year 1998-1999 "Whether on facts and in the circumstances of the case the Appellate Tribunal was right in reversing the order of CIT(A) and directing to exclude the following receipts to the chargeable interest as under:- 1. Service charges under lease/hire purchase -Rs. 73,07,670/- 2. Scrutiny Fees -Rs. 97,83,115/- 3. Legal cum service charges -Rs. 21,000/- 4. Sales tax loan service charges -Rs. 1,97,118/- 5. Upfront Fees -Rs. Service charges under lease/hire purchase -Rs. 73,07,670/- 2. Scrutiny Fees -Rs. 97,83,115/- 3. Legal cum service charges -Rs. 21,000/- 4. Sales tax loan service charges -Rs. 1,97,118/- 5. Upfront Fees -Rs. 1,87,95,669/-" Tax Appeal No. 105/2009 assessment year 1999-2000 "Whether on facts and in the circumstances of the case the Appellate Tribunal was right in reversing the order of CIT(A) and directing to exclude the following receipts to the chargeable interest as under:- 1. Service charges under lease/hire purchase -Rs. 63,73,306/- 2. Scrutiny Fees -Rs. 1,30,49,584/- 3. Sales tax loan service charges -Rs. 4,04,248/- 4. Upfront Fees -Rs. 1,43,63,900/-" 3. Heard Mr. Manish R. Bhatt, learned Senior Counsel appearing with Mrs. Mauna M. Bhatt, Standing Counsel for the revenue and perused the orders passed by the authority below. 4. Mr. Manish R. Bhatt, learned Senior Counsel has submitted that while disposing appeals for both the years, the Tribunal has relied on its order passed in the case of Gujarat Industrial Investment Corporation Limited, Ahmedabad. The revenue has preferred appeals against the said order of the Tribunal and those appeals being Tax Appeal No. 1605/2008 with Tax Appeal No. 1606/2008 have been admitted by this Court. He places on record a copy of the order dated 26.08.2009 passed in the said appeals. In view of the above facts, questions, as referred to hereinabove, are formulated as substantial questions of law for determination and consideration of this Court, after the appeals being admitted. 5. Notice to the other side. Additional paper books, if any, to be filed within three months from today. 6. To be heard with Tax Appeal No. 1605/2008 and Tax Appeal No. 1606/2008." 11. Both the aforesaid issues raised in Tax Appeal Nos. 104/2009 & 105/2009 are already concluded by the decision of this Court rendered in Tax Appeal No. 1903/2009 decided on 27.06.2016. For ready reference, the said judgment is reproduced hereunder; "Tax Appeal No. 1839 of 2005 arises out of the order dated 30/03/2005 passed by the ITAT in Interest Tax Appeal No. 65/Ahd/04 for assessment year 1998-99 and came to be admitted on the following question of law: Whether the Appellate Tribunal is right in law in deleting the addition made on account of amount earned by the respondent as hire purchase financial charges under the Interest Act, 1974? 2. 2. Tax Appeal No. 18 of 2007 arises out of order dated 30/03/2006 made by the ITAT in ITA No. 43/Ahd/2003 for assessment year 1999-00 and came to be admitted on the following questions of law: (A) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT (A) holding that hire purchase charges are not in the nature of interest as per the provisions of Interest Tax Act? (B) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT (A) in deleting the addition of Rs. 4,54,33,195/- on the ground that lease rental income was not subject to Interest Tax Act? 3. Tax Appeal No. 1903 of 2009 arises out of an order dated 27/06/2008 made by the ITAT in ITA No. 84/Ahd/2003 for assessment year 2000-01 and came to be admitted on the following questions of law: [A] Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by the CIT (A) and thereby deleting the addition of Rs. 2,95,28,998/- being lease rent included in the chargeable interest? [B] Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by the CIT(A) and thereby deleting the addition of Rs. 3,19,800/- being service charges under hire purchase agreement? [C] Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by the CIT(A) and thereby deleting the addition of Rs. 1,28,42,728/- being security fee and charges under lease agreement? [D] Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by the CIT(A) and thereby deleting the addition of Rs. 1,81,673/- being upfront frees included in chargeable interest? 4. Tax Appeal No. 1065 of 2010 arises out of an order dated 29/05/2009 made by the ITAT in ITA No. 19/Ahd/2004 for assessment year 2000-01 and came to be admitted for the following questions of law: (A) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) holding that the sum of Rs. 17,81,300 being hire purchase charges are not in the nature of interest as per the provisions of Interest Tax Act? 17,81,300 being hire purchase charges are not in the nature of interest as per the provisions of Interest Tax Act? (D) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT (A) in deleting the addition of Rs. 19,22,96,972/- on the ground that lease rental income was not subject to Interest Tax Act? 5. Learned Counsel for the appellant has taken us to the scheme of the Act under the Interest Tax Act, 1974 and contended that in view of the provisions of Section 2 read with Sections 3 to 6 of the Act, the interest which is accrued by the Finance Company as defined under the Act is required to be taxed under the Interest Tax Act. 5.1 He has also taken us to the judgment rendered by this High Court in Tax Appeal No. 120 of 2004 and allied matters dated 17/03/2015 and also taken us to the decision of the Hon'ble Apex Court in case of Asea Brown Boveri Limited v. Industrial Finance Corporation of India, (2005) 126 Com.Cases 332 wherein in paragraph No. 9 it has been held that the Tribunal has to consider the criteria which was laid down and contended that the matter is required to be remanded. 6. On the other hand, learned Counsel for the respondent has taken us to the Circular and contended that it is well settled legal position that even if the transaction is covered, but if circular is in existence, then the circular will be applied. It has been contended that it has come on record that in all four matters, depreciation is claimed and if the depreciation is not claimed, then it is not the financial and it is a lease as understood and the Tribunal has given concurrent findings. Lastly, he has contended that the issue raised in these four appeals may be answered in favour of the assessee. 7. We have heard learned Counsel for the revenue and learned Counsel for the assessee. 8. Taking into consideration the decision rendered in Tax Appeal No. 120 of 2004 and allied matters dated 17/03/2015, more particularly, paragraph No. 4.3, the department has contended that the Circular is not applied in the present case. Paragraph No. 4.3 of the said order reads as under: 4.3. 8. Taking into consideration the decision rendered in Tax Appeal No. 120 of 2004 and allied matters dated 17/03/2015, more particularly, paragraph No. 4.3, the department has contended that the Circular is not applied in the present case. Paragraph No. 4.3 of the said order reads as under: 4.3. It is further submitted by Shri Desai, learned advocate for the Revenue that the learned Tribunal has materially erred in not considering the CBDT circular No. 738 and 760. It is submitted that in circular No. 760 dated 13.1.1998, CBDT has clearly given parameters to decide whether the transaction is a true hire purchase transaction or a financing transaction in the form of a hire purchase transaction. It is submitted that in the aforesaid circular it is specifically opined that if the transactions are in substance in the nature of financial transaction, the hire charges should be treated as interest subjected to Interest Tax Act. 9. It is also required to be noted that the CIT (A) while considering the criteria, has applied the circular and has also found that depreciation is claimed and therefore considering the guidelines issued in paragraph No. 3 of the Circular has granted benefit which has been confirmed by the Tribunal. The said paragraph No. 3 of the Circular reads as under: 3. As to what constitutes a transaction in the nature of hire-purchase, the Assessing Officer should consider the issue on merits taking into account, inter alia, the following facts and circumstances: (i) The terms of the agreement. (ii) The nature of the arrangement between the supplier of the asset, the hire-purchase company and the end-user of the asset. (iii) The intention of the parties which manifests itself in the fixation of the initial payment, the method of determination of hire-purchase price, etc. When a hirer is the real purchaser of the asset but does not pay the full purchase price and the hire-purchase company pays the price or a substantial part thereof on behalf of such hirer, and a hirer, and hirer-purchase agreement is entered into merely as an agreement, then such agreement is a security for repayment of the loan and is essential a loan transaction. 10. 10. In above view of the matter and in light of the instructions issued by the Department regarding taxability of hire charges, question raised in Tax Appeal No. 1839 of 2005 is required to be answered in favour of assessee and against the Department. Accordingly, two questions raised in Tax Appeal No. 18 of 2007 are also answered in favour of assessee and against the Department. 11. Now, so far as Tax Appeal No. 1903 of 2009 is concerned, question Nos. [B], [C] and [D] which has been framed by this Court regarding deleting the addition made of the service charges, security fee and charges under lease agreement and upfront fees included in chargeable interest, are not an interest income and therefore it will not come under the Interest Tax Act and therefore all these three issues are answered in favour of assessee and against the Department. 12. So far as Tax Appeal No. 1065 of 2010 is concerned, this Court has admitted the said appeal only on two questions and in above view of the matter, both the questions framed by this Court are answered in favour of assessee and against the Department. 13. Accordingly, all these four appeals are disposed of." 12. To sum up, all the issues raised in these appeals are answered in favour of the assessee and against the Revenue. The appeals stand disposed of accordingly. No order as to costs.