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TMI Blog2004 (1) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... did not amount to loan. In view of such distinction, we are of the view that the interest on deposits would not fall within the ambit of the expression 'chargeable interest' appearing in section 5 of the Act. Thus, it is held that interest on special deposits with Reserve Bank of India (RBI) is not taxable under the Act. RBI is the principal bank ofIndiaand, therefore, the question of lending any money to such bank simply does not arise. It is only the RBI which lend money to banks and other institutions to meet their requirements and not the vice versa. Such deposit was made under a special scheme approved under the provisions of section 27B of Insurance Act. Hence, such interest would be excluded from the chargeable interest. Similarly, it is further held that interest on fixed deposits, certificate deposits as well as interest on deposits with IDBI are not chargeable to tax under the Act since such deposits cannot be considered as loans inasmuch as the money is given at the instance of the assessee for the purpose of investing the same with the banks in consonance with the provisions of section 27B of the Insurance Act. The deposit with IDBI was made at the instance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luded the above interest in the interest chargeable to tax and thus, assessed the assessee on the total interest of Rs. 1,00,62,97,800 for assessment year 1993-94, Rs. 1,30,65,84,140 for assessment year 1995-96 and Rs. 1,73,73,60,660 for assessment year 1996-97. The assessments made by Assessing Officer have been confirmed by the first appellate authority. Hence, the present appeals have been preferred by the assessee before the Tribunal. 3. The learned counsel for the assessee has submitted before us that the issue involved in the present appeals is covered in favour of the assessee by the recent decision of the Tribunal in the case of Punjab National Bank v. Dy. CIT [2003] 87 ITD 11 (Delhi) as well as by another decision of the Tribunal in the case of Sahara India Savings Investment Corpn. Ltd. v. Asstt. CIT [2001] 79ITD 56 (All.) while the learned DR has supported the orders of lower authorities by relying on the decision of the Tribunal in the case of State Bank of Hyderabad v. Dy. CIT [1998] 66 ITD 464 (Hyd.). In reply, it is submitted by the learned counsel for the assessee that the decision of Hyderabad Bench has been considered by Delhi Bench in the case of Punjab National ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in depth on this issue by referring to various case laws and provisions of other enactments. 7. First, we will refer to the relevant provisions of the Act. Section 5, which is a charging section, reads as under: "Subject to the provisions of this Act, the chargeable interest of any previous year of a credit institution shall be the total amount of interest (other than interest on loans and advances) made to other credit institutions or to any cooperative society engaged in carrying on the business of banking, accruing or arising to the credit institution in that previous year. Provided..." The expression 'chargeable interest' has been defined in section 2(5) as under: "'Chargeable interest' means the total amount of interest referred to in section 5, computed in the manner laid down in section 6." Further, the word 'interest' has been defined in section 2(7) as under: "'interest' means interest on loans and advances made inIndiaand includes- (a) commitment charges on unutilized portion of any credit sanctioned for being availed of inIndia; and (b) discount on promissory notes and bills of exchange drawn or made inIndia, but does not include- (i) interest referred to in sub-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon'ble Privy Council in a case reported as Mohd. Akbar Khan v. Attar Singh AIR 1936 PC 171 held as under: "It should be remembered that the two terms ('deposit' and 'loan') are not mutually exclusive. A deposit of money is not confined to a bailment of specific currency to be returned in specie. As in the case of a deposit with a banker, it does not necessarily involve the creation of a trust, but may involve only the creation of the relation of debtor and creditor, a loan under conditions. This distinction which is perhaps the most obvious is that the deposit not for a fixed term does not seem to impose an immediate obligation on the depositee to seek out the depositor and repay him. He is to keep the money till asked for it. A demand by the depositor would therefore, seem to be a normal condition of the obligation of the depositee to repay." 9. The distinction between 'loan' and 'deposit' was considered by the Hon'ble Madras High Court in the case of Abdul Hamid Sahib v. Rahmat Bi AIR 1965 Mad. 427. Their Lordships opined as under: "The terms 'loans' and 'deposits' are not mutually exclusive terms. There are a number of common features between the two. In a sense a deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Janki Devi v. Juggilal Kamlapat AIR 1971 SC 2551 held as under: "12. The case of a deposit is something more than a mere loan of money. It will depend on the facts of each case whether the transaction is clothed with the character of a deposit of money. The surrounding circumstances, the relationship and character of the transaction and the manner in which parties treated the transaction will throw light on the true form of the transaction." 12. Lastly, we may refer to the judgment ofApex Courtin the case of Ram Ratan Gupta v. Director of Enforcement, Foreign Exchange Regulation AIR 1966 SC 49,5. In that case, the Hon'ble Supreme Court had to consider the meaning to the expression 'to lend' as appearing in section 4 of FERA, 1947. In that connection the court discussed the meaning of the above expression and also discussed the distinction between 'loan' and 'deposit'. Their Lordships held as under: "The expression 'to lend' in the ordinary use means to deliver to another a thing or on condition that the thing lent shall be returned with or without compensation for use made of it by the person to whom it lent. The subject-matter of lending also be money. Though a loan contract creat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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