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TMI Blog1986 (2) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... tal representative, we are unable to accept the contention advanced on behalf of the assessee. A souvenir is neither a journal nor a periodical. We, therefore, find ourselves in agreement with the findings of the authorities below, that advertisement in a souvenir does not qualify for deduction under section 37(3A). 3.1 The assessee has filed before us a list of the souvenirs in which the advertisements were published. Shri Hari Har Lal, the advocate for the appellant has contended that some of the publications, e.g., Shri Krishna Sandeehar and Sanmara mentioned in the said list are published regularly at regular intervals and as such, they come within the definition of periodicals. It was also urged that the expenses incurred in connection with the advertisements in journals and periodicals should be excluded from the total advertisement expenditure while computing the amount of disallowance under section 37(3A). This contention is undoubtedly sound. In absence of necessary material we are not in a position to find out as to which of the publications in which the advertisement had appeared are journals or periodicals. We, therefore, restore the point to the assessing officer who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de only in respect of the travelling expenses, which are in excess of the limit laid down by rule 6D, we find that the disallowance has to be sustained. 6. The last ground relates to the addition of Rs. 1,23,775 made by the ITO under section 40A(8) of the Act in respect of the interest paid on deposits received from members of the public which, according to the assessee, are secured by a floating charge on certain movable assets of the assessee-company. The ITO had disallowed the claim of Rs. 1,47,018 out of the interest paid on deposits. In the appeal, we are concerned only with the amount of Rs. 1,23,775, which forms part of the said disallowance. The brief facts giving rise to the appeal on the point are these. The assessee is a public limited company. It had obtained loans by way of deposits from members of the public. The aggregate of the unsecured loans as on 31-12-1977 was Rs. 66,26,924. The assessee was in need of further funds. On 30-12-1977, a deed described as declaration of trust was executed by the assessee on a stamp paper of Rs. 35. According to the assessee, the said deed of trust was executed with the intention to secure the existing loans and the deposits to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e author of the trust indicates with reasonable certainty by any words or act (a) an intention on his part to create thereby a trust, (b) the purposes of the trust, (c) the beneficiary, and (d) the trust property, and (unless the trust is declared by will or the author of the trust is himself to be the trustee) transfers the trust-property to the trustee." The said section makes it clear that in order to constitute a valid trust its author must indicate with reasonable certainty by his words or acts, (1) an intention on his part to create thereby a trust, (2) the purpose of the trust, (3) the beneficiary, (4) the trust property, and (5) he must (unless the trust is created by will or he himself is to be the trustee), transfer the trust-property to the trustee. Paper No. 102 of the assessee's paper book is the copy of the deed of trust relied on by the assessee. The said deed recites, inter alia, that the company is desirous of securing the deposits/loans already accepted or hereinafter to be accepted by hypothecating certain movable assets in favour of the assessees. It further recites that the trustees, already referred to above, have consented to act as trustees for the deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re us. Having gone through various provisions of the Indian Companies Act we are of the view that the charge or a floating charge cannot be held to be invalid, inoperative or ineffective simply because no specific property has been made the subject-matter of the charge. The floating charge, as a type of security, is peculiar to companies as borrowers. In the case of Government Stock Co. v. Manila Rly. [1897] AC 81, Lord Macnaghton had made the following observations relating to the floating security: "A floating security is an equitable charge on the assets for the time being of a going concern. It attaches to the subject charged in the varying condition in which it happens to be from time to time. It is of the essence of such a charge that it remains dormant until the undertaking charged ceases to be a going concern, or until the person in whose favour the charge is created intervenes. His right to intervene may of course be suspended by agreement. But if there is no agreement for suspension, he may exercise his right whenever he pleases after default." 11. It is, thus, evident that a floating charge is an equitable charge which does not fasten upon any specific or definite pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eans any deposit of money with, and includes any money borrowed by, a company, but does not include any amount received by the company--- (i) to (viii) (ix) as a loan from any person where the loan is secured by the creation of a mortgage, charge or pledge of any assets of the company (such loan being hereafter in this sub-clause referred to as the relevant loan) and the amount of the relevant loan, together with the amount of any other prior debt or loan secured by the creation of a mortgage, charge or pledge of such assets is not more than seventy-five per cent of the price that such assets would ordinarily fetch on sale in the open market on the date of creation of the mortgage, charge or pledge for the relevant loan;" 15. The departmental representative has argued that Explanation (b)(ix) of the aforesaid section refers to a loan and since, the assessee had invited fixed deposits he cannot avail benefit of the aforesaid exception. In any case, it was stressed that the benefit cannot be allowed in respect of the loans which were, at the time of receipt were not secured. The contention that the loan does not include deposits cannot be accepted. The definition of the word 'd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive of the fact that it was granted in respect of the deposits to be accepted from the public and not in respect of the deposits already accepted or received. That apart the opening sentence of the assessee's letter dated 1-3-1978, which was addressed to the trustees reads as follows: "In terms of the declaration of trust dated 30-12-1977, and as security for repayment of the deposits and interest thereon as mentioned in the said declaration of trust, we confirm that as trustees, you would have a second charge on stocks of raw materials, stores spare parts, coal, coke, loose tools, gunny bags, finished and semi-finished goods pertaining to our works situated at Dalmiapuram and Salem (on hand and in transit) from the date hereof." 18. The aforesaid averment in the assessee's letter addressed to the trustees categorically states that a charge was created from the date of the letter. As such it cannot relate to a date or period prior to the date of the said letter. 19. It is undisputed that the assessee-company had invited deposits in accordance with the Companies (Acceptance of Deposits) Rules, 1975. The term 'deposit' has been defined in the said rules under rule 2(b). An Expl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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