It has been/brought to my notice that in many cases where term loans have already been sanctioned the credit institutions may be able to vary the rate of interest because loan agreements do not contain a provision permitting such variation. I propose to mvoe an amendment to the bill to provide overriding legal authority to the institutions to vary the rate of interest, if they so desire, in order to pass on the burden of interest tax to the borrowers. Further, I also propose to exempt from the imposition of interest tax cooperative land mortgage banks, cooperative land development banks and cooperative societies engaged in the business of banking which cater primarily to the needs of farmers and village artisans. My proposal to extend the coverage of the expenditure tax to the expenditure incurred in restaurants providing superior facilities like air conditioning has been generally welcomed because these restaurants are partronised by the affluent sections of the society. It has, however, been pointed out that the criteria for identification of restaurants, expenditure in which would come within the purview of the proposed tax, is cumbersome in the form in which it is contained in the bill. I, therefore, propose to modify it and adopt a single crietrion, which will be that the restaurant is air-condtioned. I will be moving necessary amendments to the bill for this purpose. I propose to make some modifications to the proposals in the bill relating to deduction of tax at source from certain payments. The requirement to deduct tax from interest on bank deposits will apply only to interest on term deposists other than recurring deposists. Further, cooperative land mortgage banks, cooperative land development banks, primary agricultural credit socieities and primary credit socieities will be taken out of the purview of this requirement. We would thus exclude from the ambit of tax deduction at source most of the depositors from rural areas.
