TaxTMI 
TaxTMI 
1990 (3) TMI 137
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....n the stock and debts as well as the immovable property belonging to the assessee company for the benefit of the depositors as security for the repayment of the deposits. This charge for a sum of Rs. 30,00,000 had been registered under section 125 of the Companies Act. When the Income-tax Officer made the assessment on 4-8-1984, he did not make any disallowance under section 40A(8). On a review of that order the Commissioner of Income-tax was of the opinion that section 40A(8) was attracted inasmuch as the charge was not created in favour of the person who gave the loan but in favour of trustees and hence he directed the disallowance of 15% of the interest paid on the deposits under section 40A(8) of the Act. 3. The assessee is in appeal t....
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....e of any assets of the company and the loan is not more than 75% of the value of the assets. If the transaction of the assessee satisfies these conditions, then the provisions of section 40A(8) need not be applied. The assessee had taken deposits from the share-holders and had secured the repayment of the deposits by a trust deed creating a charge in favour of the depositors. The Registered deed dated 18-10-1982 clearly states that the company creates a charge by way of hypothecation of the stocks, debtors, loans, advances and immovable property belonging to the company for Rs. 30 lakhs on pro rata basis. The view of the Commissioner that the charge should be directly in favour of the person from whom the loan is taken is untenable both in ....
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...., advances and immovable property now belonging to the company for Rs. 30,00,000 (Rupees thirty lakhs only) on prorata basis. " Thereafter, the clause referring to enforcement of security says that it shall be lawful to trustees to enforce the security by selling the assets of the company with the proviso that such powers shall not be exercised unless any of the following events occur, two of which are, "(a) There is a default in the repayment of deposit exceeding Rs. 3,00,000 (Rupees three lakhs only.) (b)There is a default in the payment of interest and the arrears of such interests exceed Rs. 1,00,000 (Rupees one lakh)." In the context of the charge having been created on the total deposits these clauses can only refer to a ceiling i....