Minimum seven-year repayment period requires borrowing to extend beyond seven years, excluding loans repayable within that term.

A loan agreement repayable within seven years did not satisfy rule 1(v) of the Second Schedule to the Companies (Profits) Surtax Act, 1964, because the phrase "during a period of not less than seven years" was given its plain meaning as requiring repayment beyond the completion of seven years. A term ending on the expiry date of the seven-year period remains within seven years until that point is crossed, so the statutory minimum is not met by a loan fully repayable within seven years. The provision therefore applies only where repayment extends beyond seven years, and such borrowing is excluded from the capital base.

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Issues: Whether money borrowed under a loan agreement repayable within seven years, with the last instalment falling on the expiry date of the seven-year period, satisfied the condition in rule 1(v) of the Second Schedule to the Companies (Profits) Surtax Act, 1964 that repayment must be "during a period of not less than seven years".

Analysis: The expression was construed according to its plain and natural meaning. The Court held that "not less than seven years" denotes a period exceeding seven years and not a period ending on the completion of seven years. Until the last moment of the seven-year period is crossed, the period remains less than seven years. The proviso therefore requires repayment to extend beyond the completion of seven years, and a loan fully repayable within seven years does not meet the statutory condition. The Court also relied on the sense in which similar expressions have been understood as requiring clear days or a minimum period.

Conclusion: The entire term loan did not qualify for inclusion in the capital base under rule 1(v); the Revenue succeeded, though the unchallenged relief already granted for Rs. 16 lakhs remained undisturbed.

Final Conclusion: The statutory benefit was confined to loans repayable beyond seven years, and the balance of the term loan was excluded from the capital base.

Ratio Decidendi: An agreement providing for repayment within seven years does not satisfy a provision requiring repayment "during a period of not less than seven years", because the statutory minimum is met only when repayment extends beyond the completion of seven years.

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