TMI Blog1994 (1) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... balance was a paltry figure of Rs. 37,382 and there were hardly any asset worth the mention. 3. Shri Sampath submitted that, the figures in the Balance Sheet gave an indication that, on almost all times whenever the subscribers were due on the prized chits, the company was always short of requisite liquid funds. The two directors of the company Shri Narinder Pal Chug and Shri Subash Chand Chug, in the interest of the company, i.e., to keep it afloat and to sustain it, and to show that, the directors are genuinely interested in meeting the liabilities under the chits, brought in cash to tide over the temporary needs. The two directors felt that, it would be better to increase the paid up share capital of the company, which would ensure sufficient working capital for the company and had brought cash into the company, which they had withdrawn from their partnership firms. Subsequently, they had decided against the increase in the capital and the company, had repaid them the cash brought in. 4. Shri Sampath submitted that, since, the cash being brought into the company and it being repaid to the directors was repeated every month, the department had treated the exercise as in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company includes deposit of any nature", is clearly indicative that, sections 269SS and 269T are intended to cover only those class of receipts of money that are repayable after a notice or after a fixed period. He contended that, the Supreme Court in Banarsi Debi v. ITO [1964] 53 ITR 100, at page 106 had observed to the effect that a particular word or term if gives a doubtful meaning, that has received a judicial interpretation, either by subsequent statute interpreting the same word or the phrase in a similar context, then, it would be only proper that, the word or the term is construed in the manner it has been so interpreted. He contended that, since, the term 'loan or deposit' has not been defined in section 269SS, and it is only in section 269T that, the word 'deposit' has been given some meaning, it should be adopted as the meaning of the term 'loan or deposit'. He also made reference to the Supreme Court decision in Mehta Parikh Co. v. CIT [1956] 30 ITR 181, with specific reference to the observations contained at page 187. He contended that, the directors had filed affidavits confirming their intention of having provided cash for further issue of shares, but, subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, was with a view to augment the cash needs of the company, by proposing get more shares of the company, but, later withdrawing from that idea. He contended that, since this problem of cash shortage continued, the directors in fact had closed down the operation subsequently. He concluded his submission by stating that, by rejecting the genuine submissions of the directors and the facts as are on the record, a real fact cannot be transformed into an unreal one and therefore, the penalty should be quashed. 5. Shri S.C. Gupta, the learned senior departmental representative submitted that, merely because, the directors had clothed the transactions of cash loans as share application money, the true fact should not be lost sight of, which is loans being provided on a temporary basis in total violation of the provisions of section 269SS of the Income-tax Act. He contended that, the term 'deposit' as defined in section 269T is with reference to repayment of those moneys that are received as such. He vehemently contended that, if the Legislature desired to adopt the same meaning in section 269SS, they would have stated so and in its absence, the meaning from another section could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the Banking Regulation Act, 1949 (10 of 1949), applies and includes any bank or banking institution referred to in section 51 of that Act; (ii) "co-operative bank" shall have the same meaning assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949); (iii) "loan or deposit" means loan or deposit of money. 8. The Notes on Clauses forming part of the Finance Bill, 1984 explained the intention behind the provision, is reproduced for the sake of facility : "Clause 28 seeks to insert a new section 269SS in the Income-tax Act, relating to the mode of taking or accepting loans and deposits. The proposed provision seeks to provide that after30th June, 1984, no person shall accept any loan or deposit from any other person of ten thousand rupees or more except by account payee cheque or account payee draft. This requirement will also apply in cases where on the date of taking or accepting a loan or deposit from a person, any earlier loan or deposit taken or accepted from the same person and remaining unpaid on that date is ten thousand rupees or more. The proposed requirement will also apply, if the aggregate amount of such earlier loan or deposit and the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ping in deposit with it, for a certain period, at a fixed rate of interest. The section covers both kinds of receipt of money and since, it does not use the term 'certain period', it gives an impression that, any loan or deposit whether received temporarily or for a specific period may also be covered. The only restriction it places is on the mode of receipt of money as loan or deposit, that is, shall not be in the shape of cash. Section 269T further restricts the repayment of deposit by cash. 11. Inthe instant case, the assessee has passed resolution to the effect that, it intended to increase its paid up share capital. The two directors had brought by means of cash, which has been classified as share application money, for additional shares which they had desired to take of the company. The dates on which the cash was so brought in, coincided with the dates of draw and it is accepted by the appellant company that, the customers or subscribers had to be shown the physical existence of money which was why it was brought in by cash, so as to exhibit the genuineness of the company to keep up its promise to pay the prize winners. The claim made by the company is that, though the ult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was so brought in to tide over the tight financial situation and once the situation became favourable, it was withdrawn, is in the nature of a loan or temporary accommodation only and therefore, despite it being clothed as share application money, its true or real nature, i.e., as loan props out. 13. The case of Muthoot M. George Bankers as decided by the Tribunal was with reference to the assessment year 1989-90, of a firm and in relation to temporary accommodation from two sister concerns, which was not termed as deposit, because, the amendment to section 269T covering deposit of any nature was effective from 1-4-1989, it was concluded that, the temporary accommodation from and to the sister concerns was inapplicable. In the present case before us, the situation is not similar and therefore, the cited Tribunal decision is inapplicable. 14. The decision of Mehta Parikh Co. relied upon by the appellant company for the proposition that, the affidavits and the entries as made in the account books not having been controverted, the department could not challenge its nature, in our opinion is a far-fetched proposition. This is because, the very transaction of receipt and payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly in contravention to the provisions contained in section 269SS of the Act. We are therefore of the view that, the plain reading of the section along with the Notes on Clauses in unambiguous in the intention of roping in all loans or deposits that are received otherwise than by account payee cheques or account payee drafts, and penalty has been rightly imposed. 17. The dates of draw are fixed up well in advance, and the extent of liability is also known and therefore, it cannot even be argued that, there was an emergency which could not be overcome except by bringing in cash. The provisions of this section, does not recognise exceptional circumstances, as in the Rule 6DDJ which provides for exceptional circumstances for payment in cash. Another factor is that, even before the amount that was brought in was repaid, fresh amounts have been brought in, and all of the repayments have been by means of cheques only. When the company has a bank account and the firm is also enjoying banking facilities, and both the concerns are located in the same city, transfer of funds from one to the other should not have posed any difficulty and therefore, the claim that, the directors wanted to exh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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