TMI Blog1992 (3) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the extent prescribed under section 40A(B) of the Act?" The brief facts of the case are that the Income-tax Officer, while finalising the assessment for the assessment year 1980-84, disallowed sum of 15 per cent. interest paid under section 40A(8) of the Act. This interest was paid to the directors on their current accounts maintained with the company. The Commissioner of Income-tax (Appeals) deleted the said disallowance and, affirming the decision of the Commissioner of Income-tax (Appeals), it was held by the Tribunal that, under section 40A(8) of the Act, where the assessee, being a company (other than banking company or a financial company), incurs any expenditure by way of interest in respect of any deposit received by it, fiftee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posit in the case of a current account. As already stated, deposit for the purposes of section 40A(8) means a " deposit ". A " deposit ", according to the ordinary dictionary meaning as given in Chambers 20th Century Dictionary (Revised Edition) at page 281, is " something entrusted to another's care ". The restrictions of withdrawal may be of the amount or as to the time. Such a situation does not exist in the case of an amount standing to the credit of a person in a current account like the one involved in the present case. The provisions of sub-section (8) of section 40A of the Act, during the relevant period, were as under : (8) Where the assessee, being a company (other than a banking company or a financial company), incurs any exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst orders for the supply of goods or for the rendering of any service; (viii) by way of subscription to any share, stock, bond or debenture (such bond or debenture being secured by a charge or a lien on the assets of the corn any) pending the allotment of the said share, stock, bond or debenture, or by way of advance payment of any moneys uncalled and unpaid: upon any shares in the company, if such moneys are not repayable in accordance with the articles of association of the company (ix) as a loan from any person where the loan is secured by the creation of a mortgage, charge or pledge of any assets of the company ( such loan being hereafter in this sub-clause referred to as the relevant loan) and the amount of the relevant loan, toget ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lapse of specified time and a deposit account repayable at the end of a given period of notice. When the amount is deposited in the bank, a relationship of debtor and creditor is established. There are instances where, after a fixed deposit receipt is obtained by a person and the same is pledged in the current account maintained in the bank and withdrawals are made from such current account, the withdrawals and deposits in such current account are also of the nature of loans and deposits. The deposits which are understood in the business in a bank may be in the current account, savings bank account or fixed deposit account. The payment in a current account cannot be excluded from the nature of deposits which are made in banks. The express ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (9) was specifically added in the definition of deposit in the said Rules with effect from September 18, 1975, which excluded deposits by directors from the term" deposit ". This specific exclusion by the amendment in the Rules makes it more clear that deposits by the directors were included in the term", deposit " and it is by way of a specific provision that the same has been excluded. The words " deposit by the directors ", which were excluded by the insertion of clause (9), refers to all deposits whether they are for fixed period or in their current accounts. In the Explanation referred to above by defining the word " deposit ", no such exclusion has been made and, therefore, deposits by directors in their current accounts cannot be e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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