2016 (7) TMI 1047

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....eads as under: "Whether the appellate Tribunal has substantially erred in law and in the facts of the case, in holding that the Assesse's deposits with SAIL amounted to loan and/or advance within the meaning of Section 2(7) of the Interest Act as amended with effect from 1st October, 1991." 2. HUDCO is in the business of financing housing projects promoted by various organisations including the State Governments. It is stated that during the course of its business, HUDCO deposits with various companies the surplus funds that are available to it. In the AYs in question, surplus funds were deposited by HUDCO with the Steel Authority of India Limited (SAIL). 3. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)]....

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....inition of "Loans and Advances" chargeable to tax under section 2(7) read with Section 5 of the Interest Tax Act." 5. After discussing the definition of interest as contained in Section 2(7) of the ITA and the decisions of the Supreme Court as well as of the High Courts, the Special Bench concluded that there is a distinction between the expression „deposit‟ and the term „loans and advances‟. It was held: "20. ........ Furthermore "loans" and "deposits" cannot be taken to be identical in meaning when a recourse is taken to the provisions contained under the Companies Act, 1956. Section 58A and section 227 of the Companies Act, 1956 in itself clearly place distinction between the two expressions. The explanation add....

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.... amount from the depositee. This again indicates that the two expressions are different. 22. From the foregoing discussion we are of the considered view that despite similarities, the two expressions "loans" and "deposits" are to be taken different and distinction can be summed up by stating that in the case of loan the needy person approaches the lender for obtaining the loan there from. The loan is clearly lent at the terms stated by the lender. In the case of deposit, however, the depositor goes to the depositee for investing his money primarily with the intention of earning interest. In view of this legal position it has to be held that interest on deposits representing investment of surplus funds would also not fall under the definiti....

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....on of any credit sanctioned for being availed of in India; and (b) discount on promissory notes and bills of exchange drawn or made in India, but does not include - (i) interest referred to in sub-section (1B) of Section 42 of the Reserve Bank of India Act, 1934 (2 of 1934); (ii) discount on treasury bills;" 9. The definition to the extent it uses the word 'means' purports to be exhaustive. However, it has both an 'includes' and a 'does not include' portion. Apart from interest on „loans and advances‟, what is included are only two categories: (i) commitments charges and (ii) discounts on promissory notes and bills. There is no other transaction that is contemplated under the inclusive portion. As f....