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TMI Blog1980 (2) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... e held to be "Deposit" contemplated by s. 40A(8) and, therefore, the disallowance directed by the Commr. in his order is not justified. The Commr. held in his order that the term "Deposit" covers moneys borrowed from persons and the facts that the assessee has not invited deposits from the public is not material and further that the relatives and friends of the management cannot be excluded from the "Public." 2. In is the submission of the ld. Counsel for the assessee before us that the interest paid by the assessee to the directors and other family members and friends in a current account maintained for them does not come within the purview of s. 40A (8). In this connection, he pointed out that sub-s. (8) of s. 40A, was inserted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a private limited company and the amounts on which interest has been allowed by it are purely on the current accounts of the directors and the family members and friends, that is to say, that were not deposits from the public. The ld. Counsel then referred to the meaning of "current account" given in the extract from the Jowitt's Dictionary of English Law by the late the Right Honourable the Earl Jowitt and Clifford Walsh L.L.M., Solicitor of Supreme Court, Second Edition by John Burde (Barrister) Volume 1, which reads as under: "Current Account" in banking, a term used to distinguish drawing accounts from fixed deposits accounts. In partnership and individual entrepreneur's accounts a current account for each partner or the entrepreneu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties, we hold that the provisions of s. 40A(8) could not be held to be attracted to the interest paid by the assessee on the current account balance of the Managing Director and other family members in this case. In the first place, as pointed out by the ld. Counsel for the assessee, the object of the enactment is to discourage companies from borrowing from the public by way of deposits at attractive rates of interest to the depositors as the borrowing from the scheduled banks become costlier. Therefore, in considering provisions of this section, we cannot overlook the mischief or loophole which is sought to the countered or plugged by the provision. The deposit which the non-banking companies obtain from the public is generally long ..... X X X X Extracts X X X X X X X X Extracts X X X X
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