Y.K. Kapur, Judicial Member - (1.) IN this appeal filed by the assessee the challenge is to the order of the authorities below who according to the assessee have brought to tax the interest earned by it on the placement of surplus funds with institutions like Steel Authority of INdia Ltd. (SAIL) within the provisions of the INterest Tax Act, 1974. The assessee has challenged the orders of the authorities below on the grounds enumerated below : - 1. On the facts and circumstances of our case and in law the CIT(A) erred in confirming the treatment of the AO in subjecting to tax the interest earned on deposit of surplus funds within the meaning of Section 7(2) of the INterest Tax Act of 1974.
(2.) The CIT(A) was not justified in rejecting out plea that chargeable interest of a credit institution should only include any interest earned on loans and advances made by it in terms of the provision contained in section 5 read with section 2(7) of the interest tax act and that there is no warrant in law to include any interest earned on deposits made based on any dictionary meaning. The assessee corporation begs permission to amend/add any ground and permitted to produce all evidence in support of the contentions raised above. 2. At the time of hearing of the appeal the main trust of the assessee's argument was that the assessee is into the business of financing housing projected promoted by various organizations including the State Government. During the course of the business the assessee some times has surplus funds and in order to have the optimum use of the surplus funds, the funds available are made available to various companies and in this case it was made available to SAIL. According to the assessee the provisions of Section 2(7) of the Interest Tax Act are applicable only to the interest earned from loans and advances and the placement of surplus funds do not fall within the meaning of loan and advances and, therefore, the provisions of Section 2(7) of the Interest Tax Act are not applicable. While advancing his arguments further, it was submitted by the Id. AR for the assessee that the surplus funds are invested after the negotiations are undertaken and the interest is settled and, therefore, it cannot partake the character of loans and advances as expressed under the Interest Tax Act. According to the assessee the authorities below were wrong and have failed to draw a distinction between the loans and advances and deployment of surplus funds which par take the character of deposits. The Id. Counsel in support of his contention drew our attention to the order of the Mumbai bench of the Tribunal in Interest Tax Appeal No.9/Bombay/96. 3. To the arguments raised by the Id. AR, the Id. DR submitted that there is not distinction between the loans and advances and deposits and the deployment of surplus funds which par take the character of deposits. To buttress his arguments further, the Id. Dr drew out attention to the meaning of the word 'deposits' and 'lons' as explained in Law Lexicon wherein it has been stated that : "The terms 'loans' and 'deposits' are not mutually exclusive terms. There are a number of common features between the two. In a sense a deposit is also a loan with this difference that it is a loan with something more. Both are debts repayable. But, when the repayment is to be furnished the real point of distinction between the two concepts emerges. A loan is repayable the minute it is incurred. But this is not so with a deposit. Either the repayment will depend upon the maturity date fixed therefore or the terms of the agreement relating to the demand on making of which the deposit will become repayable."
(3.) AFTER having drawn out attention to the Law Lexicon, the Id, DR brought to our notice the meaning of the word 'loans' and deposits u/s 295(1) of the Companies Act. Ld. DR, while referring to the commentary in A Ramada's Companies Act drew out attention to page 19.1 wherein it has been observed that for the purposes of this Section there is not distinction between 'loan' and 'deposit'. It was the submission if the Id. DR that under the Companies Act as far as 'loan' and 'deposit' are concerned, such a definition is immaterial as a deposit like any other loan is only the money lent, except that it is repayable only on demand. It was the case of the Id. DR that in both the case of loans and deposit the relationship is one of debtor and creditor.;