1997 (2) TMI 94

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..... 40A(8) of the Act ? (2) Whether the Appellate Tribunal was correct in invoking section 40A(8) of the Income-tax Act, 1961, to deposits from directors and share holders, especially in view of the legislative background and the provisions of the Companies (Acceptance of Deposits) Rules, 1975 ? (3) Was the Appellate Tribunal right in ignoring the principle of 'pari materia' while interpreting the word 'deposits' in section 40A(8) of the Income-tax Act, with reference to that word in the Companies (Acceptance of Deposits) Rules, 1975 ? (4) Whether the Tribunal was justified in not applying the notification G.S.R. No. 50E, dated February 1, 1977, which exempted small scale industries, to the applicant ? " The assessee, a private limited .....

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..... ld not be applicable to loans from the directors and shareholders. But learned counsel invited us to look into the provisions contained under the Companies (Acceptance of Deposits) Rules, 1975, which came into force on February 3, 1975, along with its amendment by adding clause (ix) in the definition of the term "deposit" in the said Rules with effect from September 18, 1975. Clause (ix) excluded deposits by the directors from the term "deposit". The provisions under sub-section (8) of section 40A of the Income-tax Act were brought into the statute under the Finance Bill, 1975, with effect from April 1, 1976, following the amendment to the Companies Act incorporating section 58A under which the Companies (Acceptance of Deposits) Rules, 1975 .....

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..... also. So long as no such amendment is made to the provisions of the Income-tax Act as in the case of the Companies (Acceptance of Deposits) Rules, 1975, we find no reason to hold that provisions contained under sub-section (8) of section 40A of the Income-tax Act would not be applicable to deposits made by directors or shareholders. A similar view was taken by the Rajasthan High Court in CIT v. Gandhi Metals Mills (P.) Ltd. [1993] 200 ITR 252. The decision of the Madhya Pradesh High Court relied on by learned counsel for the assessee is of no help to him. On the facts of the case it is seen that the Tribunal had found that interest was not paid by the assessee in respect of any deposit received by it. In the light of the above discussion .....

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