TMI Blog1990 (1) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts, viz., 1. ITA No. 379 of 87 M/s Sayaji Iron Works (Quary) Pvt. Ltd. Rs. 7,030 2. ITA No. 380 of 87 M/s Sayaji Iron Works (Contracts) Pvt. Ltd. Rs. 23,910 3. ITA No. 381 of 87 M/s sayaji Iron Engg. Co. Pvt. Ltd. Rs. 14,808 3. In the opinion of the Commissioner the assessments as made by the ITO in the cases of the appellants were erroneous and prejudicial to the interest of Revenue inasmuch as the amount of interest paid, as mentioned above, was not allowable in view of the provisions of s. 40A(8) of the Act. Being of that opinion he issued the necessary notices to the appellants asking them to show cause why the aforementioned amounts be not disallowed and included in their assessments. The appellants' explanation before the learned Commissioner was that the amounts of interest had been paid by the appellants on the balances in the 'current accounts' of the directors, shareholders and/or their relatives and therefore the same were not disallowable. It was contended on behalf of the appellants that the balances in the current account did not fall within the purview of the definition of the term 'deposit' u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was directly on the point and there being no decision of the Madhya Pradesh High Court be followed in preference to the decision of the Special Bench in the case of KALOOMAL SHORIMAL SACHDEV. On the other hand the learned Sr. Departmental Representative vehemently urged that this Bench is bound by the decision of the Special Bench in the case of KALOOMAL SHORIMAL SACHDEV and since the decision in the case of CIT vs. KALANI ASBESTOS PVT. LTD. is not a decision from the Jurisdictional High Court the same should not be followed in preference to the decision of the Special Bench. The learned Sr. Departmental Representative further submitted that in view of the fact that in the case of one of the appellants before us the Special Bench decision was followed by the Tribunal in deciding the appeal for immediately preceding year, we must maintain consistency in our view at least on the same point, on the same facts and in the cases of the same assessee or assessees similarly placed. 6. After having given our utmost consideration to the points raised before us and after having made quite a serious study of the cases referred to above we are of the considered opinion that in deciding thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pradesh High Court in its decision cited supra, was not to disallow interest even on the credit balances in the current account of the directors and shareholders. 8. It seems to us that the Special Bench was also conscious of the fact that credit balances in the current accounts of the directors and shareholders could not be equated with the deposits made with the company. In the case before the Special Bench the learned Vice-president, whose order represents the minority view, dealt with the distinction between a current account and a deposit at sufficient length. The learned Vice-President expressed himself on the point as follows in para 17 and 18: "17. Even from the purely legal point of view, there is a difference between a current account and a deposit. The right to demand return of money and enforce the same; fixation of different periods after which only the demand can be made; different limitation periods under the Limitation Act for making demands or filing suits for recovery; the fixed nature of a deposit as contrasted with the daily or even from frequent fluctuation in amounts in a running account; the difference specifically cast by the Companies (Acceptance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holders attracted the provisions of s. 40A(8) of the Act. In coming to hold the majority view the learned Judicial Member had taken specific note of the treatment given to the amounts in the relevant accounts by the assessee himself. In para 26 the learned Judicial Member observed as follows: "However, the assessee has always treated the amounts in the current accounts as money borrowed for the purposes of business and claimed and was allowed deduction of interest under s. 36(1)(iii) of the Act. Even the assessee while filing the return treated the amounts as deposits and disallowed 15 per cent interest voluntarily. This, too, gives an indication as to how the assessee has looked at these deposits. Whether these were deposits under s. 40A(8) cannot be a mixed question of facts and law and the fact that the assessee treated them as deposits is a fact which cannot be brushed aside as inconsequential.". 10. A close study of the decision of the Special Bench in the case of KALOO MAL SHORIMAL SACHDEV clearly suggests that disallowance of interest payment on credit balances in the current accounts of the directors and shareholders of the company was not unhesitatingly disapproved ..... X X X X Extracts X X X X X X X X Extracts X X X X
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