TMI Blog2004 (6) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 ---------------- Rs. 14,47,290 ---------------- The relevant facts are that in the assessment order passed by the Assessing Officer under section 8(2) of the Interest Tax Act, the aforesaid interest of Rs. 14,47,290 was included in the computation of chargeable interest. The assessee had claimed that the aforesaid interest was earned on intercorporate deposits and therefore it was beyond the purview of charge of interest tax. The Assessing Officer did not indicate any reasons for rejecting the claim. The learned CIT(A) has dealt with this issue at paras 3 and 3.1 of his order, which may be reproduced below: "Ground No. 2 is against charging Interest-tax Act on interest of Rs. 14,47,290 being inter-corporate deposits. The appellant has pressed the same arguments as advanced in the case of interest on debentures and bonds. For the reasons given above, it is held that the interest on inter-corporate deposits represent interest on loans and advances and accordingly the provisions of section 2(7) of the Interest Tax Act, 1974 applied to such interest. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 ITR 266 (Mad.) (iv) Baidyanath Plastic Industries (P.) Ltd. v. K.L. Anand, ITO [1998] 230 ITR 522 (Delhi). The ld. counsel has invited our attention to the ratio of the case of Pennwalt (India) Ltd., which is reproduced below from the headnote: " Held , allowing the petition, that there was a distinction between a loan and a deposit for the purpose of the Companies Act, 1956, and in the absence of anything to hold that the deposits made by the appellant company with well known independent companies were in fact loans or amounts lent by the appellant company and borrowed by those companies, they had to be considered as deposits for the purposes of section 370. Section 371 laid down penal consequences for failure to comply with the provisions of section 370. Since non-compliance involved penal consequences, section 370 could not be given an interpretation wider than that warranted by the actual words used therein. Without any provision to that effect, the word 'loan' as used in section 370 could not be given a wider interpretation so as to include deposits. The dividing line between a loan and deposit is undoubtedly thin; the two, however, are not synonymous. Sections 58A a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made between the two for the purpose of calculating the period of limitation. If the two transactions were identical, there would be no need to prescribe different periods of limitation." The learned counsel submitted that similar view has been taken by the Bombay High Court in the case of Durga Prasad Mandelia. The cases of A.M. Shamsudeen and Baidyanath Plastic Industries Ltd. arose under section 269T of the IT Act and for the purposes of that section, it was held that deposits are different from loans. 6. The ld. DR supported the orders of the Revenue authorities and submitted that the definition of 'interest' contained under section 2(7) is inclusive definition. As per this definition, 'interest' means interest on loans and advances and also includes some other receipts as mentioned thereunder. It is argued that the term 'loan' and 'advance' is very clear and unambiguous and there is no question of beneficial interpretation in assessee's favour when the provisions of law are clear. For this proposition, he has relied on the Karnataka High Court decision in the case of Mysore Silk Industries Ltd. - 185 CTR 417. The ld. DR submitted that the cases decided by the Bombay High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposits and under the Explanation, the term 'deposit' has been defined as under: "For the purposes of this section 'deposit' means any deposit of money with, and includes any amount borrowed by, a company but shall not include such categories of amount as may be prescribed in consultation with the Reserve Bank of India." In view of the provisions of the Companies Act, the Hon'ble Bombay High Court held that under that Act, there is a clear distinction between the term 'loan' and deposit. Section 370(1) only refers to 'loan' and it was held by the High Court that the term 'loan' as appearing in section 370(1) will not include a 'deposit'. It should also be kept in view that the Hon'ble Bombay High Court was concerned about the consequences of contravention of section 370 of the Companies Act and therefore the provisions had to be construed very strictly. It is significant that the term 'advance' has neither been considered nor dealt with by the Hon'ble Bombay High Court in the above cases. In view of the specific provisions of sections 58A and 227(1A)(d) of the Companies Act, it was held by the High Court that it may not be possible to interchange the terms 'loan' and 'deposit' ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
