TMI Blog2016 (7) TMI 1047X X X X Extracts X X X X X X X X Extracts X X X X ..... “interest on loan and advances”, occurring in Section 2(7) of the Act should include „interest on deposits‟ as well notwithstanding that there is no reference to such interest in the definition itself. The Special Bench of the ITAT was conscious of this submission made before it and has rejected it and in view of this Court rightly. What the ITAT appears to have done in the impugned order is to re-characterise the contract entered into between HUDCO and SAIL for the purpose of the former placing deposits with the latter as a loan transaction. There was no occasion for the ITAT to do so only with a view to bringing it within the definition of Section 2(7) of the ITA, when the plain language of the statute does not contemplate inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State Governments. It is stated that during the course of its business, HUDCO deposits with various companies the surplus funds that are available to it. In the AYs in question, surplus funds were deposited by HUDCO with the Steel Authority of India Limited (SAIL). 3. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] rejected the plea of HUDCO that the interest earned on the deposit did not fall within the definition of 'interest' under terms of Section 2 (7) of the Interest Tax Act, 1974 (ITA). The ITAT by the aforementioned impugned orders affirmed the orders of the AO and the CIT (A). It concluded that since money had been placed at the disposal of the SAIL under a contract, it could partake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and advances‟. It was held: 20. ........ Furthermore loans and deposits cannot be taken to be identical in meaning when a recourse is taken to the provisions contained under the Companies Act, 1956. Section 58A and section 227 of the Companies Act, 1956 in itself clearly place distinction between the two expressions. The explanation added to Section 370 of the Companies Act, 1956 by the Companies (Amendment) Act, 1988 for including deposits for the purpose of loan was for a limited purpose of inter corporate transaction and a similar amendment has not been made in the Act under which the issue is being considered. The revenue s plea that the decision rendered by Bombay Bench of the Tribunal in LIC v. JCIT was in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n there from. The loan is clearly lent at the terms stated by the lender. In the case of deposit, however, the depositor goes to the depositee for investing his money primarily with the intention of earning interest. In view of this legal position it has to be held that interest on deposits representing investment of surplus funds would also not fall under the definition of interest as given in section 2(7) of the Act and as such would not be liable to interest tax. The answer to the question under reference in our humble opinion is that investments made by way of short term deposits and also in the form of securities and bonds cannot be considered as loans and advances and as such interest thereon shall be outside the scope of interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;means' purports to be exhaustive. However, it has both an 'includes' and a 'does not include' portion. Apart from interest on loans and advances‟, what is included are only two categories: (i) commitments charges and (ii) discounts on promissory notes and bills. There is no other transaction that is contemplated under the inclusive portion. As far as exclusionary portion is concerned, there are again only two categories excluded i.e. (i) interest referred to in Section 1B of Section 42 of the Reserve Bank of India Act and (ii) discount on treasury bills. There is no scope of going beyond the above definition of 'interest'. When a definition uses an expression means and that is followed by interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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