TaxTMI 
TaxTMI 
TaxTMI 
2011 (7) TMI 507
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....d. Vs. Deputy Commissioner of Income Tax reported in [2008] 306 ITR 254. It is further submitted that the decisions of the Apex Court in the case of Eastman Industries Ltd. Vs. Deputy Commissioner of Income Tax (cited supra) and in the case of Commissioner of Income Tax Vs. Corporation Bank) reported in [2007] 295 ITR 193 have relevance to the facts of the present case to examine the factual position as to whether the interest herein was from Government Securities only. Having regard to the above-said aspect, as far as the second question is concerned, the order of the Tribunal is set aside and the issue stands remanded back to the Tribunal for consideration of the factual position as to whether the securities possessed by the assessee are Government Securities. 3. The assessment year herein relates to 1994-95. The assessee is a Finance Company. The dispute herein relates to the interest received on the advance made to the manufacturer for a sum of Rs.90,81,702/- in respect of the purchase of goods in relation to the Hire Purchase/lease agreement entered into with the customers. The Assessing Officer viewed that the advances made for the purchase of the goods amounted to lo....
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....sp; 7. The Tribunal pointed out that interest on loans and advances would certainly be 'interest' as per the provisions of the Interest Tax Act. Admittedly, as the assessee had made the advance payment for the purchase of goods, the advances were to be adjusted in the cost as and when the goods were delivered. Hence, the advance made by the assessee to the suppliers could not be treated as a loan/advance as contemplated under the Interest Tax Act. The Tribunal further pointed out that it was never in the contemplation of the assessee to receive back the advances from the dealers or suppliers. Interest charged on advances, particularly trade advances for purchase of goods, are not the same as loan and advance and hence, did not come within the purview of the Interest Tax Act. In that view, the Tribunal allowed the appeal. Hence the present appeal by the Revenue. 8. Learned Standing Counsel for the Revenue submits that going by the definition 'Credit Institution' and 'Finance Company' under Section 2(5B) of the Interest Tax Act, 1974, and read with Section 5 of the Interest Tax Act, the interest earned by the assessee would fall for chargeability under the Interest Tax Act (....
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....ere presence of some of the attributes of the loan transaction in a deposit would not be sufficient to regard the loan as a deposit. This Court further held that the expression "deposit", as defined in Section 269T of the Income Tax Act means the deposit of money which is repayable after notice or after the period. 12. Keeping this distinction in the background, as already pointed out, the case of the assessee herein is that it advanced money to the manufacturing company for the purchase of the machinery. On the advance thus made, for the delay in delivery, the manufacturing company was stated to have paid interest. The advance paid was adjusted against the purchase price. Thus the advance paid to the supplier was not for earning interest to be repaid at a later point of time. The Revenue does not deny this that the amount given was a trade advance towards the purchase of machinery and the interest amount was adjusted against the cost of goods supplied. The Revenue also does not dispute the fact that the intention of the assessee when the assessee advanced the amount was not for earning interest or for repayment of the amount given as advance, but towards the purchase of ma....
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.... provisions of the Act reveals that the credit institution earning interest engaged in the business of providing advances and loans are liable to pay interest tax under the Interest Tax Act. Interest is defined under Section 2(7) of the Interest Tax Act to mean interest on loans and advances made in India and includes (a) commitment charges and on unauthorised portion of any credit sanctioned for being availed of in India and (b) discounts of promissory notes on bills of exchange drawn or made in India. It however does not include interest referred to in sub section (1)(b) of Section 42 of Reserve Bank of India Act, 1942 and discount on treasury bills. Thus though the definition of "interest" is an exhaustive one; yet, interest can be assessed under the provisions of the Act only if and when it is an interest on loans and advances, as stated in the definition and not otherwise. Going by the definition of "financial companies" it is evident that each of the clauses under the above said Section includes companies which carry on the business of that nature as its principal business. While Clause 1 is as regards the principal business of hire purchase transaction, Clause 2 deals with t....
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....tion with a word "loan' may or may not include the obligation of repayment. If it does then it would be a loan. Thus, arises the conundrum as to what meaning one would attribute to the term "advance'. The rule of construction to our minds which answers this conundrum is noscitur a sociis. The said rule has been explained both by the Privy Council in the case of Angus Robertson v. George Day (1879) 5 AC 63 by observing "it is a legitimate rule of construction to construe words in an Act of Parliament with reference to words found in immediate connection with them" and our Supreme Court in the case of Rohit Pulp & Paper Mills ltd v. Collector of Central Excise 1990(47)ELT491(SC) and State of Bombay v. Hospital Mazdoor Sabha (1960)ILLJ251SC . " 17. Thus the Delhi High Court held that the word "advance" could only mean such advances which carried with it an obligation of repayment. It further held: " Trade advance which are in the nature of money transacted to give effect to a commercial transactions would not, in our view, fall within the ambit of the provisions of Section 2(22)(e) of the Act. This interpretation would alloy the rule of purposive construction with nosc....