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TMI Blog2003 (9) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... ore dismissed. - - - - - Dated:- 22-9-2003 - Judge(s) : M. KATJU., U. PANDEY. JUDGMENT The judgment of the court was delivered by M. KATJU J. - This is an appeal under section 260A of the Income-tax Act, 1961, challenging the order dated October 15, 1999, of the Income-tax Appellate Tribunal, Allahabad. This appeal and connected appeals I. T. A Nos. 72 of 2003, 36 of 2000, 38 of 2000, 40 of 2000, 154 of 2000 and 155 of 2000 are being disposed of by a common judgment. Heard Sri Bharatji Agarwal, learned senior standing counsel for the Department, and Shri Percy Pardiwalla and Shri S. D. Singh, for the respondents. We have carefully perused the record. The respondent-company is a company registered under the Indian Companies Act. In the order of the Commissioner of Income-tax (Appeals) in I. T. A. No. 154 of 2000, it is mentioned that as per the memorandum of association the objects for which the company was established are: "1. To establish, promote, conduct, manage, maintain, improve, regulate, run, work and control the different types of schemes for encouraging the habit of savings and wise economy amongst the public on scientific, practical lines and also help ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion has been defined in section 2(5A) of the Act to mean: "(i) a banking company to which the Banking Regulation Act, 1949, applies; (ii) a public financial institution as defined in section 4A of the Companies Act, 1956 ; (iii) a State financial corporation established under section 3 or section 3A or an institution notified under section 46 of the State Financial Corporations Act, 1951, and (iv) any other financial company." The word "interest" in section 2(7) of the Act, prior to its amendment with effect from October 1, 1991, was defined as follows: "'interest' means interest on loans and advances made in India and includes- (a) commitment charges on unutilised portion of any credit sanctioned for being availed of in India, and (b) discount on promissory notes and bills of exchange, drawn or made in India, but does not include, (i) any amount chargeable to income-tax, under the Income-tax Act, under the head 'Interest on securities'. (ia) interest referred to in sub-section (18) of section 42 of .the Reserve Bank of India Act, 1934 (2 of 1934) ; (ii) discount on treasury bills." After its amendment in 1991 the definition of "interest" in sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 1957 SC 657, the Supreme Court of India stated the principle as follows (page 661 of AIR 1957 SC) : "If the Revenue satisfies the court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the Legislature and by considering what was the substance of the matter." Where the language of a provision is plain, courts cannot ordinarily concern themselves with the policy behind the provision, or the intention of the Legislature. As Lord Watson said in A. Salomon v. A. Salomon and Co. [1897] AC 22, 38 (HL) "'intention of the Legislature' is a common but slippery phrase". In ITO v. T. S. Devinatha Nadar [1968] 68 ITR 252; AIR 1968 SC 623, the Supreme Court of India observed that : "we must look to the general scope and purview of the statute, and at the remedy sought to be applied, and consider what was the former state of the law, and what it was that the Legislature contemplated" was made while construing a non-taxing statute. The said rule had on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery." The Supreme Court in paragraph 12 of its judgment has observed: "It is a well settled rule of interpretation that where the Legislature uses the words 'means' and 'includes' such definition is to be given a wider meaning and is not exhaustive or restricted to the items contained or included in such definition. Thus the meaning of 'agricultural produce' in the above definition is not restricted to any products of agriculture as specified in the Schedule but also includes such items which come into being in processed form and further includes such items which are called as gur, rab, shakkar, khandsari and jaggery." On the strength of the observation made in paragraph 12 of the above judgment, Sri Agarwal contended that the word "interest" in section 2(7) should be deemed to include its natural meaning and should not be limited to interest on loans and advances. We do not agree. Firstly, all that has been held by the Supreme Court in the case of Krishi Utpadan Mandi Samiti [1993] Supp 3 SCC 361 (II) is that agricultural produce in section 2(a) of the U. P. Krishi Utpadan Mandi Adhiniyam will not only include the items mentioned in that provision but also such items i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en defines something, which is different from the meaning, which it has in common parlance. For example, section 43(3) of the Income-tax Act defines a plant to include books. Ordinarily a plant means a factory, and no one in common parlance regards a book as a factory. However, in the Income-tax Act a book is treated as a factory for the purpose of depreciation under section 32. A large number of such other instances of legal fictions can be given. It is open to the Legislature to define words and, if the Legislature has defined it, we cannot go by the meaning in common parlance or what may be called as its "natural meaning". We have to strictly abide by the meaning given to it by the Legislature, as in the present case. The new definition of section 2(7) defines interest only to mean interest on loans and advances. No doubt two other categories have also been included, i.e., commitment charges on unutilised portion of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that clause (va) of section 2(5B) was inserted by the Finance Act, 1992, from April 1, 1993. Learned counsel for the respondent, Sri Pardiwalla, submits that the respondent will become a financial company by virtue of clause (va) from the assessment year 1993-94 but before this, the respondent was not a financial company as defined in section 2(5B). On the other hand, the submission of learned counsel for the appellant is that with effect from the very beginning the respondent was a financial company and continues to be the same under clause (vi) of section 2(5B), which we have already quoted above. In this connection the Tribunal in its order (in para. 5) has observed: "We have considered the rival submissions, facts and circumstances of the case, the R. B. I.' s regulations, the assessee's main objects and the other evidence placed on record carefully and are of the opinion that reliance of the Commissioner of Income-tax (Appeals) on object No.2 contained in the assessee's memorandum and articles of association is absolutely misplaced because the Commissioner of Income-tax (Appeals) has missed to take note of the words 'in which the company may be required to invest u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent company in view of the above directions because an investment company is specifically excluded by clause (v) of Direction "2 mentioned above. On the other hand, Sri Bharati Agarwal, learned counsel for the appellant, has submitted that object No.2 contained in the assessee's memorandum of association includes the power to buy, sell, invest or otherwise deal in securities, bonds or fixed deposits issued by any institution, corporation, etc., under any Central or State enactments or in other securities in which the company requires interest under any law. Hence, he submitted that this makes the respondent a miscellaneous finance company under clause (vi) of section 2(5B). We do not agree. To be a miscellaneous finance company under clause (vi) of section 2(5B), a company has to carry on exclusively, or almost exclusively, two or more classes of business referred in clauses (i) to (va) of section 2(5B). It may be noted that clauses (i) to (v) of section 2(5B) all use the words principal business. For instance, a hire-purchase financial company is a company which carries on as its principal business, hire-purchase transactions or the financing of such transactions. Hence if a co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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