Section 20

49. Sub-heading" B.—Interest on securities" and sections 18 to 21 omitted by the Finance Act, 1988, w.e.f. 1-4-1989. Prior to their omission, sub-heading, section 18 (as amended by the Finance Act, 1965, w.e.f. 1-4-1965 and the Finance Act, 1988, w.e.f. 1-4-1988), section 19, section 20 (as amended by the Finance Act, 1979, w.e.f. 1-4-1980) and section 21, read as under:

'B.—Interest on securities

18. Interest on securities - (1) The following amounts due to an assessee in the previous year shall be chargeable to income-tax under the head" Interest on securities",—

(i) interest on any security of the Central or State Government;

(ii) interest on debentures or other securities for money issued by or on behalf of a local authority or a company or a corporation established by a Central, State or Provincial Act.

(2) Nothing contained in sub-section (1) shall be construed as precluding an assessee from being charged to income-tax in respect of any interest on securities received by him in a previous year if such interest had not been charged to income-tax for any earlier previous year.

19. Deductions from interest on securities - Subject to the provisions of section 21, the income chargeable under the head" Interest on securities" shall be computed after making the following deductions—

(i) any reasonable sum expended by the assessee for the purpose of realising such interest;

(ii) any interest payable on money borrowed for the purpose of investment in the securities by the assessee.

20. Deductions from interest on securities in the case of a banking company -(1) In the case of a banking company—

(i) the sum to be regarded as a sum reasonably expended for the purpose referred to in clause (i) of section 19 shall be an amount bearing to the aggregate of its expenses as are admissible under the provisions of sections 30, 31, 36 and 37 (other than clauses (iii), (vi), (vii) and (viia) of sub-section (1) of section 36) the same proportion as the gross receipts from interest on securities (inclusive of tax deducted at source) chargeable to income-tax under section 18 bear to the gross receipts of the company from all sources which are included in the profit and loss account of the company;

(ii) the amount to be regarded as interest payable on moneys borrowed for the purpose referred to in clause (ii) of section 19 shall be an amount which bears to the amount of interest payable on all moneys borrowed by the company the same proportion as the gross receipts from interest on securities (inclusive of tax deducted at source) chargeable to income-tax under section 18 bear to the gross receipts from all sources which are included in the profit and loss account of the company.

(2) The expenses deducted under clauses (i) and (ii) of sub-section (1) shall not again form part of the deductions admissible under sections 30 to 37 for the purposes of computing the income of the company under the head" Profits and gains of business or profession". Explanation: For the purposes of this section," moneys borrowed" includes moneys received by way of deposits.

21. Amounts not deductible from interest on securities - Notwithstanding anything contained in sections 19 and 20, any interest chargeable under this Act which is payable outside India (not being interest on a loan issued for public subscription before the 1st day of April, 1938) on which tax has not been paid or deducted under Chapter XVII-B, and in respect of which there is no person in India who may be treated as an agent under section 163 shall not be deducted in computing the income chargeable under the head" Interest on securities".'