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Issues involved:
Interpretation of section 40A(8) of the Income-tax Act, 1961 regarding interest paid on the surplus of the current account of a director. Analysis: The High Court of Calcutta was tasked with deciding whether section 40A(8) of the Income-tax Act, 1961 applied to the interest paid on the surplus of the current account of a director for the assessment years 1981-82 and 1982-83. The case involved Hari Finance and Trade (P.) Ltd., where the Assessing Officer disallowed 15% of the interest paid to a director, invoking the provisions of section 40A(8) of the Act. The Tribunal, following a decision of the Madhya Pradesh High Court, ruled that section 40A(8) did not apply to the interest paid on the current deposit of the director in the company. The High Court noted that the definition of "deposit" under sub-section (8) of section 40A included any deposit of money, without excluding current deposits. The court highlighted that the legislative intent did not exclude current deposits from the definition of "deposit." Therefore, the court disagreed with the view taken by the Madhya Pradesh High Court and held that for the purpose of section 40A(8), "deposit" encompassed the current deposit of the director, warranting the disallowance of 15% interest payable by the company on such deposits. Ultimately, the High Court ruled in favor of the Revenue and against the assessee, stating that the Assessing Officer rightly invoked the provisions of section 40A(8) to disallow 15% interest payable on the director's deposit. The application was disposed of, with all parties instructed to act on a signed copy of the order. In conclusion, the judgment clarified the application of section 40A(8) of the Income-tax Act, emphasizing that the definition of "deposit" included current deposits, leading to the disallowance of interest payable on such deposits. The decision underscored the importance of adhering to the statutory language and legislative intent in interpreting tax provisions.
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