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TMI Blog2004 (2) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... various chitties has to be considered as accepting deposits under a scheme is not correct and is without appreciating all the facts of the case. It is also the case of the assessee that assessee cannot be considered as "exclusively or almost exclusively" carrying on two or more classes of business referred to in sub-section (5A) or (5B) of section 2 of the Interest Tax Act. According to the assessee, Reserve Bank of <?xml:namespace prefix = st2 /> India has exempted the company from registration under section 45(1A) of the Reserve Bank of India Act since the principal business of the assessee is chitty business. It is again the case of the assessee that the Commissioner (Appeals) went wrong in holding that since more than 60% of the income of the assessee is from chitty business, assessee becomes a "credit institution" as per clause (va) of section 2(5B) of the Interest Tax Act. It is incorrect and contrary to the law. 4. The facts leading to the dispute, briefly, is as under. Assessee is a company running chitty business, hire-purchase and hiring business, and therefore, the Assessing Officer held that the assessee is exigible to Interest Tax Act for its receipt under i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on bank deposits. Thus, assessee's income of more than 70% was derived from activities other than those specified in clauses (i) to (va) of sub-section (5B) of section 2 of the Interest Tax Act. Assessee also objected to treating the assessee as a credit institution. 7. However, the ld. Commissioner of Income-tax (Appeals) rejected the assessee's claim vide para 5(b) of his order on the following lines: '5(b). I have considered the claims of the appellant. The appellant company admittedly is not a financial company within the meaning of clauses (i) to (v) of section 2(5B) of the Interest Tax Act. However, the provisions of clause (va) of section 2(5B) of the Interest Tax Act defining a financial company and consequently a credit institution are relevant at this stage, which are as follows:- '(va) a residuary non-banking company (other than a financial company referred to in sub-clause (i), (ii), (iii), (iv) or (v), that is to say, a company which receives any deposit under any scheme or arrangement, by whatever name called, in one lump sum or in instalments by way of contributions or subscriptions or by sale of units or certificate or other instruments or in any other manne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee admittedly is not a financial company within the meaning of clauses (i) to (v) of section 2(5B) of the Interest Tax Act. After giving the above finding, the Commissioner (Appeals), however, held that assessee comes within the ambit of clause (va) of section 2(5B) of the Interest Tax Act. He so held because according to him, assessee receives subscriptions under various chitty schemes from the subscribers of the chitty. CIT(A) held that this amounts to accepting deposit "in instalments by way of contribution or subscription or in any other manner stated in clause (va)". It is the case of the assessee that this finding of the Commissioner (Appeals) is erroneous. It is the case of the assessee that to attract the provisions of clause (va), the company should receive deposits in one lump sum or in instalments by way of contribution or subscription etc. or in any other manner. The section becomes applicable to an assessee if there is acceptance of "deposit". The amount received by the assessee cannot be treated as a deposit and this fact has not been properly considered by the Commissioner (Appeals). 9. Clause (va) of section 2(5B) was introduced by Finance Act, 1992 with effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or by sale of units etc. is a financial company falling within the meaning of "credit institution". There is no dispute that assessee receives subscription under various schemes from subscribers to each chitty organized by the assessee. This, in fact, amounts to accepting deposits "in instalments by way of contribution or subscription ......... or in any other manner". Assessee admits that 60% of its income is from chitty business and also 10% of its interest. That means, major portion of the income is from chitty business. The only point, the Id. departmental representative submitted, to be seen is whether the assessee-company receives any deposit by virtue of any scheme or arrangement by whatever name called. He submitted that it may be true that assessee may not be advancing these amounts to subscribers for the purposes of loan/advances so as to earn income by way of interest from such receipts. No doubt, assessee has collected deposit under chitty scheme. That means, assessee falls within the ambit of 'credit institution'. Hence, the ld. departmental representative submitted, the order of the Commissioner (Appeals) is liable to be upheld. 11. Considering the rival submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in any other form, but does not include- (i) .............................. (ii) ............................. (iii) ............................ (iv) ............................. (v) .............................. (vi) ............................. (vii) Any amount received by subscription in respect of chit. Explanation I. - 'Chit' has the meaning assigned to it in clause (b) of section 2 of the Chit Funds Act, 1982." Thus, it is clear that deposits include and also deemed to include any receipt of money by way of deposit or loan in whatever form. But, this definition excludes the amount received by way of subscription in respect of chit. That means, chitty company cannot be treated as 'credit institution' for the purpose of Interest Tax Act. As rightly contended by the assessee's representative, since there is no definition of deposit in Interest Tax Act, the definition given in Reserve Bank of India Act, 1934 is to be adopted. The subscriptions received from the subscribers are thus to be excluded from the ambit of 'deposit'. In the light of the above discussion, we are of the view that the orders of the revenue authorities are liable to be cancelled. Ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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