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TMI Blog1981 (2) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee's business within the meaning of section 36(1)(iii) of the Income-tax Act, 1961?" 2. The assessee is the PEPSU Road Transport Corporation, Patiala, incorporated under the Road Transport Corporations Act, 1950 (hereinafter called "the Act"), and is a company within the meaning of s. 2(17) of the I.T. Act. It carries on the business of plying passenger buses. The assessment year is 1965-66. Section 23 of the Act provides: "Capital of the Corporation.-(1) The Central Government and the state Government may provide to a Corporation established by the State Government, in such proportion as may be agreed to by both the Governments, any capital that may be required by the Corporation for the purpose of carrying on the undertaking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g its working capital." 4. Section 28(1) is in the following terms: "28. Payment of interest and dividend.-(1) Where the capital of Corporation is provided by the Central Government and the State Government under sub-section (1) of section 23, the Corporation shall pay interest on such capital at such rate as may, from time to time, be fixed by the State Government in consultation with the Central Government and such interest shall be deemed to be a part of the expenditure of the Corporation." 5. In view of these provisions, the capital was provided by the Union of India through the Northern Railway, and the Punjab Govt. The assessee paid interest to both the Northern Railway as well as the Punjab Govt. as claimed by them. The only poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 Act, on the basis of the provisions on which the liability on the part of the assessee to pay interest arose, contains no provision for repayment of the capital in question as such. The nearest provision in this regard is contained in section 30 of the said Act with a marginal heading 'Disposal of net profit'. From that section also it cannot be inferred that any repayment of the loan as such by the assessee either to the State Government or to the Central Government, who both had provided the capital in question, was contemplated. We, therefore, conclude that the interest paid in the instant case was not in respect of the capital, which can be said to have been borrowed as such. The assessee is thus not entitled to the deduction under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that since the interest is payable thereon, as provided under S. 28 of the Act, the assessee is entitled to claim this deduction under s. 36(1)(iii) of the I.T. Act. 10. The word "borrow" has not been defined in the statute and, therefore, its dictionary meaning has to be looked up. The meaning of the word "borrow" as given in the Shorter Oxford Dictionary (3rd edn.), is "to take (a thing) on security given for its safe return. To take a thing on credit on the understanding of returning it or an equivalent". Reference in this respect may also be made to CEPT v. Bhartia Electric Steel Co. Ltd. [1954] 25 ITR 192 (Cal). In this also, the question was whether it was "money had and received" or "borrowed money". It was held that there has to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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