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ORDER L Narasimha Reddy, J. - This reference is made by the Income Tax Appellate Tribunal, Hyderabad B Bench at the instance of Commissioner of Income Tax, A.P.-I, Hyderabad framing the following question: "Whether on the facts and in the circumstances of the case, the ITAT is correct in law in holding that the overdue interest on the demand bills is not chargeable to tax under the Interest Tax Act, 1974?" 2. The respondent is a Nationalised Bank and as part of its transactions, it undertakes several activities including lending of loans and purchasing of bills of exchange. The parliament enacted the Interest Tax Act, 1974 (for short the Act) providing for levy of tax on interest on loans and advances. The respondent submitted returns as required under the Income Tax Act, for the Assessment years 1976-1977 to 1979-80, 1981-82 to 1986-87, 1992-93 and 1993-94, before the concerned I.T.O. Several claims of deductions or recoveries were made under different heads. 3. One such recovery was the exemption from payment of tax for the amount representing the overdue interest on the demand bills, which are bills of exchange, purchased by the respondent. The I.T.O. treated such amounts as covered by the provisions of the Act and subjected them to levy of tax. 4. Appeals preferred by the respondent before the Commissioner were dismissed, following the judgment of the Karnataka High Court, reported in State Bank of Mysore v. CIT[1989] 175 ITR 607/[1988] 41 Taxman 275. Aggrieved by such orders, respondent filed batch of appeals before the Tribunal. Through its common order dated 22.10.1997 the Tribunal held that the amounts representing overdue interest on demand bills are not liable to be levied the tax under the Act. The Revenue was not satisfied with the outcome of the appeals and accordingly filed applications under Section 256 (1) of the Income Tax Act with a request to refer the common question to this Court. Through its order dated 26.5.1998, the Tribunal referred the question noted above. 5. Sri S.R. Ashok, learned standing counsel for the Income Tax Department submits that the Act takes in its fold, the interest liveable on loans and advances as well as the amounts…

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