2004 (5) TMI 28 - HC - Income Tax

Contravention of section 269T penalty for violation of section 27IE - of taking or accepting certain loans and deposits - A bare reading of section 269T prior to the amendment and section 269SS makes it abundantly clear that the Legislature made a distinction between the mode of repayment of certain deposits which conditions provided in section 269T were not made applicable to a case of loan; loans and deposits have been treated differently in section 269SS and the unamended section 269T - Loan had not been included in deposit under unamended section 269T, thus, the scheme of sections 269SS and 269T as the provision stood before amendment in the relevant assessment year provided for repayment of certain deposit by way of account payee cheque not that of loan Thus, this revenue s appeal is meritless so it is dismissed

Summary

Issues:
- Appeal by Commissioner of Income-tax against order of Income-tax Appellate Tribunal regarding penalty under section 269T of Income-tax Act, 1961 for assessment year 1990-91.
- Interpretation of section 269T regarding repayment of deposits and loans.
- Effect of subsequent amendment in 2002 introducing the word "loan" in section 269T.

Analysis:
The judgment pertains to an appeal by the Commissioner of Income-tax against an order of the Income-tax Appellate Tribunal concerning the imposition of a penalty under section 269T of the Income-tax Act, 1961 for the assessment year 1990-91. The assessee was initially charged with a penalty for contravention of section 269T, and after a series of appeals, the Tribunal set aside the penalty based on the argument that the amount in question was a loan and not a deposit, thus falling outside the purview of section 269T.

The crux of the issue lies in the interpretation of section 269T regarding the repayment of deposits and loans. The Tribunal's decision was based on the distinction between a deposit and a loan, highlighting that the provisions of section 269T do not encompass loans. The Tribunal referred to a decision by the apex court in CIT v. Bazpur Co-operative Sugar Factory Ltd. [1988] 172 ITR 321 to support its stance that the essence of a deposit involves a liability to return the amount, a characteristic not applicable to loans. Additionally, the Madras High Court's judgment in A.M. Shamsudeen v. Union of India [2000] 244 ITR 266 was cited to emphasize the differentiation between loans and deposits under sections 269T and 271E.

Furthermore, the judgment delves into the impact of the amendment made in 2002 to section 269T, which introduced the term "loan" for the first time. The court analyzed the legislative intent behind the amendment, emphasizing that the extension of section 269T to cover loans signifies a substantive change and not a mere clarification. The court rejected the argument that loans were implicitly included in the term "deposit," emphasizing the clear distinction maintained between loans and deposits in the legislative framework.

The court also compared the provisions of section 269T with section 269SS, which dealt with the mode of accepting loans and deposits before the amendment. The distinction between the treatment of loans and deposits under these sections reinforced the view that loans were not considered deposits under the unamended section 269T. Consequently, the court found the appeal to be devoid of merit and dismissed it, with each party bearing their own costs incurred during the legal proceedings.