9911796707
TMI Blog1983 (6) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... money with the assessee prior to 1st January, 1976 on which the assessee paid interest amounting to Rs. 1,46,488. Invoking the provisions of s. 40A(8) of the It Act, 1961, the ITO disallowed Rs. 21,974 (15% of Rs. 1,46,488). 4. In appeal before the Commissioner (A), the assessee contended that the provisions of s. 40A(8) of the IT Act are ultra vires and therefore the disallowance made by the ITO is bad in law. It was further submitted that since the provisions of s. 40A(8) came into force from 1st April, 1976 the interest paid (payable) prior to 31st March, 1976 cannot come within the mischief of that section. The Commissioner (A) in his order rejected the first contention of the assessee about the vires of the provisions as according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eposit" in cl.(b) of the Explanation to the said section and submitted that there is distinction between the loans and deposits and since in the instant case the money advanced by the various persons were loans, the provisions of s. 40A(8) could not be attracted. He further submitted that since the assessee received the amounts from various persons, the same cannot be treated as borrowings and therefore there is no justification in sustaining the disallowance made by the IT Authorities. According to the ld. Counsel for the assessee, the assessee would be entitled to claim full deduction of Rs.1,46,488 by virtue of the provisions of cl.(iii) of sub-s.(1) of s. 40A which have to be read hormoniously with the provisions of cl. (iii) of sub-s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that 15% of the interest paid on the deposits has to be disallowed irrespective of the fact that the assessee was required to pay such interest under a contract. According to the ld. representative for the department, the distinction between loans and deposits as well as borrowings and receipts attempted to be made on behalf of the assessee was not well conceived and should be rejected out-right. Inviting our attention to sub-ss. (3), (5) (7) of s. 40A of the Act, the ld. representative for the department wanted to impress upon us that the provisions of these sub-sections as well as sub-s. (8) are applicable to the assessment year without any hindrance or hurdles like payments made prior to certain dates, contract entered into pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a deduction". In the instant case it is not disputed that the assessee made it claim for deduction of Rs. 1,46,488 as an expenditure incurred by way of interest in its normal course of business. Again, it is not disputed that the said amount was paid to various persons who had deposited certain amounts with the assessee. Clause (b) of the Explanation to s. 40A (8) defines "deposits" to mean "any deposit of money with, and includes any money borrowed by, a company, but does not include any amount received by the company." In view of the clear language used in the relevant provisions of the Act, we are not impressed by the submissions made on behalf of the assessee regarding the difference between loans and deposits as well as receipts a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
