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TMI Blog1991 (11) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the Income-tax Officer under section 263 of the Act ?" Shortly stated, the facts leading to the reference are that the assessment for the assessment year 1985-86 was completed under section 143(3) on November 26, 1985. The Commissioner of Income-tax was of the view that the said assessment order was erroneous in so far as it was prejudicial to the interests of the Revenue on the ground that the Income-tax Officer had applied an incorrect rate of tax and that there had been an incorrect application of article 12(2) of the Convention for Avoidance of Double Taxation resulting in a total undercharge of tax of Rs. 37,690. In that view, he started proceedings under section 263 by issue of a notice dated February 23, 1988. The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment, the order passed by him is erroneous being prejudicial to the interests of the Revenue." Accordingly, the Commissioner of Income-tax set aside the assessment order and directed the Income-tax Officer to frame a fresh assessment keeping in view his discussions in the order under section 263 and after allowing the assessee a reasonable opportunity of being heard. The assessee appealed before the Tribunal. The Tribunal held that when a deposit is renewed on the basis of a fresh application, a new contract comes into existence and so the deposits renewed by the assessee with the Housing Development Finance Corporation after November 23, 1981, have to be interpreted as loans "first created" and so the tax to be charged was only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticle 12 enjoins the charging of tax at a rate not exceeding 15 per cent. in respect of interest paid on a loan or debt first created after the date of entry into force of the said convention. The question that arises for consideration in this reference is the interpretation of the words "first created". According to the Revenue, the deposits by the assessee with the Housing Development Finance Corporation Ltd. (H. D. F. C.) were renewed. Therefore, it is, according to him, erroneous to treat such renewed deposits as fresh deposits as contemplated in article 12(2) of the convention. Under the terms and conditions of deposits with the Housing Development Finance Corporation, the discharged deposits will not be accepted for renewal unless ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation on which the time of payment has been extended. (Kedey v. Petty, 54 N. E. 798, 800; 153 Ind. 179). A deposit is repayable either on the maturity date fixed therefor or according to the terms of the agreement relating to the demands an the making of which the deposit will become repayable. It, therefore, logically follows that the renewal of a deposit is a fresh contract of deposit because the first deposit falling repayable has to be construed as having been repaid and renewal is recycling the fund in a fresh deposit. It cannot be said that renewal is a continuation of the contract of the first deposit. It is more so when the renewal is effected by execution of a fresh contract under the terms and conditions of the deposit rules of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition every time when an application is made for renewal but also other permits which are almost automatically renewed, such as one in the case of a motor cab or one authorising an owner to use a vehicle as a private carrier. The words "renewed" and "renewal" need not therefore, necessarily carry the same meaning in all cases. An applicant for renewal of a stage carriage permit along a particular route will generally have to survive competition along with other applicants when he applies for renewal and all that he can claim is a preference over others if other conditions are equal. Where, therefore, a permit is granted to him once more, it cannot, in our opinion, be treated as the old permit extended for a fresh period. In fact, as po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y indicated the renewal was by way of fresh application for deposit as required by the terms and conditions of the deposits, the same has to be treated as fresh deposit. Despite the use of the word "renewal", the renewed deposit is really a fresh deposit and such renewal would have to be considered as a fresh deposit each time. Our attention has also been drawn to two decisions, one of the Madras High Court and the other of the Bombay High Court in Sujani Textiles Pvt. Ltd. v. Assistant Registrar of Companies [1980] 50 Comp Cas 276, and in Jagjivan Hiralal Doshi v. Registrar of Companies [1989] 65 Comp Cas 553, respectively. There the word "renew" in the context of section 58A of the Companies Act, 1956, and the Companies (Acceptance of D ..... X X X X Extracts X X X X X X X X Extracts X X X X
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