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TMI Blog2005 (11) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... e analogy would apply in this Act also. Since Interest-tax Act specifically defines the expression 'interest' it would not be necessary to resort to the meaning assigned to it under a different statute. It, can conveniently be said that the omission of interest on securities in the new definition brought in statute after its amendment in 1991 was not for enlarging the scope of levy in any manner whatsoever but the scope of amendment was only to cover various entities as referred in the speech by the Hon'ble Finance Minister. From the foregoing discussion we are therefore, of the considered view that interest under the Act is confined to interest on loans and advances only and the same cannot be extended to include interest on bonds and other securities. There is however, another aspect to the issue as to whether the loans and advances shall also include deposits, so as to charge amount of interest thereon for the purpose of levying tax under this Act. Long drawn arguments were made before us on this aspect also. The dividing line between. a loan and deposit is undoubtedly very thin. It is, therefore, essential to understand the distinction between the two on the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion uses the expressions 'mean' and 'includes' and as such the same is not an extensive definition but is exhaustive in itself. When exhaustive definition is given, then there remains no scope for giving interpretation, implication, presumption, addition or subtraction to what has clearly and exhaustively been mentioned therein. For this proposition reliance was placed on the Supreme Court judgment in Smt. Tarulata Shyam vs. CIT 1977 CTR (SC) 275 : (1977) 108 ITR 345 (SC) wherein the apex Court has stated the settled principle of law as under: in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. 3. He also placed reliance on the recent decision of Hon'ble Allahabad High Court in the case of CIT vs. Sahara India Savings Investment Corpn. Ltd. (2003) 185 CTR (All) 136 : (2003) 264 ITR 646 (All) and two other judgments in the cases of A.N.Z. Grindlays Bank vs. Dy. CIT (2003) 79 ITJ (Del) 475 : (2003) 131 Taxman 183 (Del)(Mag) and Punjab National Bank vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed while art. 22 deals with the period of limitation for suits for money on account of deposit. The starting period of limitation under arts. 19 and 21 on the one hand and art. 22 on the other are different. Under arts. 19 and 21 the cause of action in the case of money lent arises from the date of loan, whereas under art. 22 the cause of action in the case of a deposit arises from the date of demand. Therefore, the deposit is clearly distinguishable from the loan. Reliance was also placed on various case laws as under: (i) Ram Janki Devi vs. Juggilal Kamlapat AIR 1971 SC 2551; (ii) Ram Ratan Gupta vs. Director of Enforcement AIR 1966 SC 495; (iii) Abdul Hamid Sahib vs. Rahmat Bi AIR 1965 Mad 427; (iv) Sharda Talkies (Firm) vs. Smt. Madhulata Vyas AIR 1996 MP 68. It was, therefore, contended that in that view of the matter interest earned on deposits and securities bonds would fall outside the scope and ambit of chargeable interest under this Act. 7. Shri Dwivedi also states that if the Tribunal is of the view that two interpretations are possible, then also the possible interpretation which reads favourable to the assessee has to be given a precedence over the other view. Reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect to advancing of loans on which interest earned can be. said to have any implication for the purpose of its assessability under this Act. It was also stated that the Tribunal decision in the case of Punjab National Bank strongly relied by the assessee's counsel to state that it will not be legally acceptable to include interest on securities, bonds and debentures within the definition of interest under s. 2(7) of the Act, cannot be taken a basis for arriving at the conclusion on the question under reference inasmuch as that order was rendered by the Division Bench by following the majority view of the co-ordinate Benches of the Tribunal. This fact is borne out from para 71 of that order. Likewise the decision rendered by the Mumbai Bench of the Tribunal in the case of Life Insurance Corporation of India vs. Jt. CIT (2002) 74 TTJ (Mumbai) 624 : (2002) 82 ITD 749 (Mumbai) will also be of no help to the issue under consideration as that was the decision rendered in the case of a statutory corporation. The learned Departmental Representative, therefore, seeks to rely on the decision of Hyderabad Bench of the Tribunal in the case of State Bank of Hyderabad vs. Dy. CIT (1998) 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DBI, IFCI, IRCI and ICICI. It was again withdrawn by Finance Act, 1985. By the Finance (No.2) Act, 1991, the Act was reintroduced w.e.f. 1st Oct., 1991. Again the same has been withdrawn by the Finance Act, 2000 w.e.f. 1st April, 2001. Issue under reference however relates to the Act as applicable between the period 1st Oct., 1991 to 31st March, 2001. When the Act was reintroduced by Finance Act, 1991, some changes were made. The scope of the applicability of the Act was widened by extending its applicability to all other non-banking financial companies and State financial institutions besides banks and public financial institutions. The definition of the word 'interest' was also modified. 10. In the scheme of the Act, Section 5 of the Act defines the scope of chargeable interest to mean the total amount of interest of a credit institution other than interest on loans and advances to other credit institutions and co-operative society engaged in carrying banking business. Sec. 4 is the charging section and provides the charge on 'chargeable interest' of the credit institution and the rate of such levy. Sec. 6 provides the computation of the chargeable interest to mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed prior to its amendment did not include the amount chargeable to income-tax, under the IT Act, under the head 'Interest on securities' but this specific exclusion does not find any place in the amended definition applicable from 1st Oct., 1991. A close examination of this clause would reveal that it does not merely talk of 'Interest on securities' but also speaks about any amount chargeable to income-tax under the IT Act, under the head 'Interest on securities'. The Finance Act, 1988 w.e.f. 1st April, 1989 omitted ss. 18 to 21 from the IT Act. Thus, there is no income left to be charged under that head. As such, the above clause has become redundant. The omission of this clause from the definition of interest under this Act, was thus to bring the provisions of 'the Act' in conformity with the IT Act. If the intention of law-makers was to tax such interest, the same could very well have been included in the second part of the definition, which speaks of the items to be included in the definition of interest. We, therefore, are unable to subscribe to the view canvassed by Revenue on the basis of Tribunal decision of Hyderabad Bench that interest on s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any credit sanctioned for being availed of in India, and discount on promissory notes and bills of exchange drawn or made in India. We are not concerned with these two additional categories in the present case. Hence, in our opinion, 'interest' in the new Section 2(7) only means interest on loans and advances, and we cannot give it an extended meaning as contended by learned counsel for the appellant. 13. The apex Court in Suresh Lohiya vs. State of Maharashtra (1966) 10 SCC 379, and also in Smt. Kasturi vs. Gaon Sabha (1989) 4 SCC 55, 58 has held that once a word has been defined in the statute, the Court cannot look elsewhere for its meaning. 14. It has also been contended by Revenue that in sub-s (28A) of Section 2 of IT Act, definition of 'interest' includes interest on deposits and the same analogy would apply in this Act also. Since Interest-tax Act specifically defines the expression 'interest' it would not be necessary to resort to the meaning assigned to it under a different statute. Sub-s.(10) of Section 2 of the Act reproduced below, shows that resort can be had to the IT Act only in respect of all other words and expressions which have not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Regulation 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 is lent. The subject-matter of lending also be money. Though a loan contract created a debt, there may be a debt and without contracting a loan, in other words, the concept of debt is more comprehensive than that of loan. It is settled law that the relationship between the banker and a customer qua debtor and creditor. Though, ordinarily a deposit of an amount in the current account of a bank creates a debt it does not necessarily involve a contract of loan. The question whether a deposit amounts to a loan depends upon the terms of the contract under which the deposit is made. AIR 1962 SC 1764, reference to. When a person deposit foreign currency in the current account of a bank in order to draw it whenever necessary for the purpose for which it was given, it cannot be said that he enters into a contract of loan with the bank within the meaning of Section 4(1) of the Act. He only deposits the money for the said purpose, such deposit is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'deposit' and loan' may not be mutually exclusive, but nonetheless, in each case, what must be considered is the intention of the parties and the circumstances. It held that the word 'loan' would not include deposit. (vi) Again the Bombay High Court considered the distinction between the words 'loan' and 'deposit' in reference to the provisions of Section 370 of the Companies Act, 1956, in Pennwalt India Ltd. vs. RoC and held as under: It is true that both in the case of a loan and in the case of a deposit there is a relationship of a debtor and a creditor between the party : giving the money and the party receiving the money. But in the case of a deposit, deposit is usually at the instance of the giver and it is for the benefit of the person who deposit the money-the benefit normally being earning of interest from a party who customarily accepts the deposits. Deposit could also be for safe-keeping or as a security for the performance of an obligation undertaken by the depositor. In the case of a loan, however, it is the borrower at whose instance and for whose needs the money is advanced. The borrowing is primarily for the benefit of the borrow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd make a demand for it. This distinction was adopted by the Lahore High Court in the case of Gurcharan Das vs. Ram Rakha Mal AIR 1937 Lahore 81. A similar view was expressed by a Division Bench of the Oudh High Court in the case of Chaturgun vs. Shahzady AIR 1930 Oudh 395. While drawing the distinction between the words 'deposit' and 'loan' the Court relied upon two earlier decisions of the Madras High Court in V. Balakrishnudu vs. Narayanaswamy Chetty (1914) 24 IC 852 and Kishtappa Chetty vs. Lakshmi Ammal AIR 1923 Mad 578 : 72 IC 842. In this regard, it held as follows: 'The word 'deposit' as pointed out by the Madras High Court in V. Balakrishnudu vs. Narayanaswamy Chetty (1914) 24 IC 852 is derived from the Latin depositum, a technical word used in the Roman law of bailment for a bailment of a specific thing to be kept for the bailor and returned when wanted, as opposed to commodatum where a specific thing is lent to the bailee to be used by him and returned. In popular language commodatum is translated by the word 'loan' and the distinction between deposit and loan is this : that a deposit is to be kept by the depositee for the depositor an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommends itself as acceptable is the one which has commended itself to the majority of the High Courts. It is, of course, not the numerical strength that prevails-though the fact that a particular view has commended itself to a majority of the High Courts in the country is a matter for consideration-but the tensile strength of the acceptable logic in those decisions. It is aptly said that 'a Judge who announces a decision must be able to demonstrate that he began from recognized legal principles and reasoned in an intellectually coherent and politically neutral way to his result'. In the present case the reasoning underlying, and implicit in, the conclusion reached by the majority of the High Courts cannot be said to be an unreasonable view and on a preponderance of preferability that view commends itself particularly in the context of a taxing statute. 20. Learned Departmental Representative also made a feeble attempt to include deposits in the term 'loans and advances'. He, however, did not bring any authority on record for our assistance. For our purpose, the advances, however, only mean advances which are in the nature of loan. Furthermore 'loans' and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intention of earning interest. In view of this legal position it has to be held that interest on deposits representing investment of surplus funds would also not fall under the definition of interest as given in Section 2(7) of the Act and as such would not be liable to interest-tax. The answer to the question under reference in our humble opinion is that-investments made by way of short-term deposits and also in the form of securities and bonds cannot be considered as loans and advances and as such interest thereon shall be outside the scope of 'interest' defined under Section 2(7) of the Act. 23. The parties prayer to hear and dispose of these appeals on merits was allowed. The grounds raised are as under: Interest-tax Appeal No. 6/Del/2000 for asst. yr. 1993-94: 1. The lower authorities have erred in subjecting the interest earned on deposits of monies made by the appellant with the following parties, to interest-tax: Party Amount Steel Authority of India 23,05,33,260 CANFINA (Canbank Financial Services Ltd.) the trade 10,34,61,929 Name of CANFINA 28,64,28,609 2. The lower authorities have erred in subjecting the interest of Rs. 41,46,371 and Rs. 1,65,700 from securitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ector corporation and interest on deposit placed with public sector corporations, consequently no interest-tax was paid on the same. The contention of the assessee was that the interest-tax is payable on interest earned on loans and advances and not on interest earned by investing funds in bonds or placed in fixed deposit. The AO did not agree with the contention of the appellant and held that interest-tax is payable on the total amount of interest earned by the credit institution. No distinction can be made on interest earned on loans and advances or interest earned on investment of surplus funds either in bonds or fixed deposits. The learned CIT(A) upheld the order of the AO and rejected appellant's contention. Aggrieved with the orders of lower authorities appellant filed second appeal. It is pertinent to note that for asst. yr. 1994-95 the Tribunal has dismissed assessee's contention and upheld the order of lower authorities. For the asst. yr. 1995-96 the Tribunal following its earlier year decision dismissed the appellant's appeal again. It is pointed out that in these two years the issue was non-inclusion of interest earned on the deposit with public sector corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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