DCIT CEN CIR 11, MUMBAI V. JAGDISHPRASAD M. JOSHI, MUMBAI

ITA 4517/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2118 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Department
• Bench Allotted: J
• Next Hearing Date: 27-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 05-06-2013
• Court: TRIBUNAL
• Assessee Lawyers: KEELKANTH KHANDELWAL
• Keywords: Period of limitation; Question of law; Avoidance of tax; Deemed dividend; Block assessment
• Section: 80IB; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH MUMBAI BEFORE SHRI R.C.SHARMA , A M & SHRI SANDEEP GOSAIN , J M ./ ITA NO . 4517 / MUM/20 1 3 ( / ASSESSMENT YEAR : 20 0 8 - 2009 ) DCI TCEN. CIR.11, MUMBAI - 20 VS. SHRI JAGDISHPRASAD M. JOSHI, JMJ HOUSE, ORCHARD AVENUE, HIRANANDANI GARDENS, POWAI, MUMBAI - 400076 ./ ./ PAN/GIR NO. : A A AP J 5006 B ( / APPELLANT ) .. ( / RESPONDENT ) /RE VENUE BY : MS. AMRITA SINGH /ASSESSEE BY : SHRI KEELKANTH KHANDELWAL / DATE OF HEARING : 12 / 10 / 2015 / DATE OF PRONOUNCEMENT 30/11 /2015 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 37 , MUMBAI FOR THE ASSESSMENT YEAR 2008 - 09 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE I.T.ACT, WHEREIN FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENUE : - (I) 'ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ER RED IN ALLOWING THE DEDUCTION U/ S 80LB WITHOUT CONSIDERING THE FACT AND DISREGARDING THE PROVISIONS OF SECTION 80IB(2)(I) THAT THE BUSINESS OF THE ASSESSEE WAS SET UP FORMED BY SPLITTING UP FOR RECONSTRUCT ION OF THE BUSINESS OF AN EXISTING CONCERN HAVING THE SAME NATURE OF BUSINESS AND MANUFACTURING SIMILAR ITEMS CONTROLLED BY THE SAME PROMOTER.' (II) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) FAILED TO APPRECIATE THE FAC T THAT THE TRANSACTION OF SALE AND PURCHASE WAS ENTIRELY WITH M/S. J.M.ESSENTIAL OIL CO. AND M/S. SACHIN PERFUMERY COSMETICS BEING PROPRIETARY ITA NO. 4517 / 13 2 CONCERN OF THE ASSESSEE AND THUS, BETWEEN TWO ARMS OF THE SAME BUSINESS OF THE ASSESSEE. ' (III) 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT THE LOANS AND ADVANCES GIVEN BY M/S.SHREE MEENAKSHI FOOD PRODUCTS PRIVATE LIMITED IT) WHICH THE ASSESSEE HELD 95.93% OF SHARES BY HOLDING THAT THE AMOUNT AGGREGATING TO RS.8,34, 75,026 / - ADVANCED BY MFPL TO VARIOUS OTHER GROUP CONCERNS OF THE ASSESSEE IS NOT LIABLE TO BE TAXED AS DEEMED DIVIDEND U / S 2(22)(E) OF THE ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT ASSESSEE IS CARRYING ON BUSIN ESS THROUGH HIS PROPRIETARY CONCERN NAMELY SACHIN PERFUMERY & COSMETICS. THIS PROPRIETARY CONCERN HAS BEEN CLAIMING DEDUCTION U/S.80IB SINCE INITIAL ASSESSMENT YEAR 2000 - 01 AND HAS BEEN ASSESSED AND ALLOWED THE CLAIM OF DEDUCTION IN THE ASSESSMENT YEAR 200 1 - 02. THIS CLAIM OF ASSESSEE WAS ALSO UPHELD IN THE BLOCK ASSESSMENT PERIOD FROM 1996 - 97 TO 2002 - 03 AND 1.4.2002 TO 28 - 5 - 2002. DURING THE COURSE OF SCRUTINY ASSESSMENT FOR THE A.Y.2008 - 09, THE AO DECLINED ASSESSEES CLAIM OF 80IB ON THIS PROPRIETARY CONCER N M/S SACHIN PERFUMERY & COSMETICS. 3. BY THE IMPUGNED ORDER, THE CIT(A) ALLOWED ASSESSEES CLAIM BY FOLLOWING THE ORDER OF HIS PREDECESSOR IN THE ASSESSMENT YEAR 2003 - 04 VIDE ORDER DATED 25 - 7 - 2011. AT PARA 5.3 THE CIT(A) HAS REPRODUCED THE OBSERVATION AN D FINDING OF CIT(A) FOR ASSESSMENT YEAR 2003 - 04. AGAINST THE ABOVE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 4. AT THE OUTSET, LD. AR PLACED ON RECORD ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2000 - 01 TO 2006 - 2007, ORD ER DATED 26 - 3 - 2014, WHEREIN ASSESSEES CLAIM FOR 80IB DEDUCTION WAS ALLOWED. THE PRECISE OBSERVATION OF THE COORDINATE BENCH WAS AS UNDER : - ITA NO. 4517 / 13 3 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE RELE VANT MATERIAL EVIDENCES BROUGHT ON RECORD. IT IS AN ADMITTED FACT THAT JMP STARTED OPERATION FROM 1996 - 97 AND WHILE IT WAS IN EXISTENCE, THE JME STARTED ITS OPERATION IN A.Y 1998 - 99 AND WHILE BOTH JMP AND JME WERE IN EXISTENCE, SACHIN PERFUMERY & COSMETIC STARTED OPERATIONS IN A.Y. 2001 - 02. IT IS ALSO AN UNDISPUTED FACT THAT IN A.Y. 1998 - 99, THE AO HAS ALLOWED THE CLAIM OF DEDUCTION IN CASE OF JMP AND JME AND IN A.Y. 2001 - 02, THE CLAIM OF DEDUCTION WAS ALLOWED IN RESPECT OF ALL THE THREE UNITS ALTHOUGH THE CIT INVOKING HIS POWERS U/S. 263 DIRECTED THE AO TO DISALLOW THE CLAIM. HOWEVER, THE SAID ORDER OF THE CIT WAS SET ASIDE BY THE TRIBUNAL IN ITA NO. 2949/M/06 DT. 25.1.2012. THESE UNDISPUTED FACTS ON RECORD CLEARLY SHOW THAT NEW TWO UNITS HAVE NOT BEEN FORM ED AFTER SPLITTING OF OR RECONSTRUCTION OF JMP. IT WOULD NOT BE OUT OF PLACE TO MENTION HERE THAT THE BAR AS PROVIDED U/S. 80IB(2)(I) IS TO BE CONSIDERED ONLY FOR THE FIRST YEAR OF CLAIM FOR DEDUCTION U/S. 80IB. ONCE THE ASSESSEE IS ABLE TO SHOW THAT IT HA S USED NEW PLANT AND MACHINERY WHICH HAS NOT BEEN PREVIOUSLY USED FOR ANY PURPOSE AND THE NEW UNDERTAKING IS NOT FORMED BY SPLITTING UP OR RECONSTRUCTION OF BUSINESS ALREADY IN EXISTENCE, IT IS ENTITLED TO THE DEDUCTION U/S. 80IB FOR SUBSEQUENT YEARS. SINC E THE ASSESSEE HAS BEEN GRANTED CLAIM OF DEDUCTION IN A.Y. 1998 - 99 IN RESPECT OF JME AND IN A.Y. 2001 - 02 IN RESPECT OF SACHIN PERFUMERY & COSMETIC CONSEQUENTLY IT CANNOT BE DENIED DEDUCTION FOR THE SUBSEQUENT YEARS INASMUCH AS RESTRAIN OF SECTION 80IB(2)(1 ) CANNOT BE CONSIDERED FOR EVERY YEAR OF CLAIM OF DEDUCTION BUT CAN BE CONSIDERED ONLY IN THE YEAR OF FORMATION OF BUSINESS. 10. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS PAUL BROTHERS 216 ITR 548 HAS HELD THAT: WHERE RELIEF GRANTED U /S. 80HH OR 80J FOR AN EARLIER ASSESSMENT YEAR ON THE SAME GROUND HAS BECOME FINAL, SAME RELIEF CANNOT BE WITHHELD FOR SUBSEQUENT ASSESSMENT YEARS WITHOUT WITHDRAWING RELIEF FOR EARLIER ASSESSMENT YEAR. 11. CONSIDERING ALL THESE FACTS IN TOTALITY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THE COMMON GROUND IN ALL THE APPEALS BY THE REVENUE ARE DISMISSED. AS THE FACTS DURING THE YEAR UNDER CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING THE ORDER OF TRIBUNAL IN ASSESSEE S OWN CASE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) ALLOWING ASSESSEES CLAIM FOR DEDUCTION U/S.80IB. ITA NO. 4517 / 13 4 5. THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO DELETING ADDITION MADE BY THE AO U/S.2(22)(E) OF THE ACT. 6. RIVAL CONTENTIONS HAV E BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A SHAREHOLDER (HOLDING 95.93% SHARES) IN M/S MEENAKSHI FOOD PRODUCTS PVF LTD MFPPL) AS ON 31 MARCH 2008. DURING THE FINANCIAL YEAR ENDED 31 MARCH 2008, MFPPL HAD MADE FOLLOWING ADVANC ES TO THE CONCERNS IN WHICH THE ASSESSEE IS A SHAREHOLDER: SR NAME OF PARTY OP BAL AS ON 1 - 4 - 07 ADVANCES DURING THE YEAR REPAYMENT CL. BAL AS ON 31 - 3 - 08 SHAREHOLDING OF APPELLANT 1. JMJ ESSENTIAL OIL C (JEOC) 43,61,525 765,000 43,61,525 765,000 50% (PAR TNER) 2 ASRANI INNS & RESORTS PVT. LTD.(AIRPL) 1,08,28,538 17,60,866 8,51,187 1,17,38,217 25.36% 3 JMJ INFRASTRUCUTRE PVT. LTD.(JIPL) - 8,00,00,000 - 8,00,00,000 50% 4 SJJ FOOD PRODUCTS PVT. LTD.(SFPPL) - 9,48,766 70,000 8,78,766 14.05% TOTAL 1,51,90, 063 8,34,75,026 52,82,712 9,33,82,377 DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR MFPPL FOR AY 2008 - 09, THE AO OBSERVED THE ABOVE ADVANCES MADE TO THE CONCERNS IN WHICH THE APPELLANT WAS A SHAREHOLDER. THE AO ISSUED SHOW CAUSE NOTICE AS TO WHY PROVI SIONS OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT SHOULD BE ATTRACTED WITH RESPECT TO THE ABOVE ADVANCES IN THE HANDS OF THE SHAREHOLDER ASSESSEE. THE MFPPL MADE SUBMISSIONS BEFORE THE AO, RELEVANT EXTRACT OF WHICH IS REPRODUCED BELOW: ' LN ORDER TO ATTRACT THE PROVISIONS OF SECTION 2(22)(E), THE IMPORTANT CONSIDERATION IS THAT THERE SHOULD BE LOAN/ADVANCE BY A COMPANY TO ITS SHAREHOLDER. EVERY PAYMENT BY A COMPANY TO ITS SHAREHOLDER MAY NOT BE LOAN/ADVANCE. IN THE CONTEXT OF THE STATUTORY PROVISIO NS, THE WORD 'LOAN' MAY BE USED IN THE SENSE OF A 'LOAN NOT AMOUNTING ITA NO. 4517 / 13 5 TO A DEPOSIT'. IN THE CASE OF UTKARSH FINANCE (P) LTD. AHMEDABAD BENCH OF THE TRIBUNAL RELIED ON GUJARAT INDUSTRIES INVESTMENT CORPN. LTD., ORIENTAL INSURANCE CO. LTD. VS. DCTT(2004) 89 1TD 520( D EL) AND HELD THAT INTEREST ON INTER - CORPORATE DEPOSITS ARE NOT CHARGEABLE TO INTEREST TAX, AS THE DEPOSITS ARE NOT IN THE NATURE OF LOAN OR ADVANCES. IT HELD AS UNDER: 'THE TERM 'LOANS AND ADVANCES' SHOULD BE UNDERSTOOD CONJOINTLY AND NOT IN ISO LATION. IF SO READ, THE ADVANCES WHICH ARE IN THE NATURE OF LOAN ALONE SHOULD BE COVERED IN THE TERM. ' THE HONORABLE TRIBUNAL FURTHER ADDED THAT 'THE INTEREST IN INTER - CORPORATE DEPOSITS UNLESS THEY DEARLY FALL WITHIN THE MEANING OF 'INTEREST ON LOANS AND ADVANCES' WOULD NOT BE T A X A B L E. INTER- CORPORATE DEPOSIT CAN NEITHER BE A LOAN NOR AN ADVANCE. FROM THE ABOVE IT IS CLEAR THERE IS DISTINCTION BETWEEN DEPOSITS VIS - A - VIS LOANS/ADVANCES. SECTION 2(22)(E) ENACTS A DEEMING FICTION WHEREBY THE SCOPE AND A MBIT OF THE WORD DIVIDEND HAS BEEN ENLARGED TO BRING WITHIN ITS SWEEP CERTAIN PAYMENTS MADE BY A COMPANY AS PER THE SITUATIONS ENUMERATED IN THE SECTION. SUCH A DEEMING FICTION WOULD NOT BE GIVEN A WIDER MEANING THAN WHAT IT PURPORTS TO DO. THE PROVISIONS WOULD NECESSARILY BE ACCORDED STRICT INTERPRETATION AND THE, AMBIT OF THE FICTION WOULD NOT BE PRESSED BEYOND ITS TRUE LIMITS. THE REQUISITE CONDITION FOR INVOKING SECTION 2(22)(E) OF THE ACT IS THAT PAYMENT MUST BE BY WAY OF LOAN OR ADVANCES. SINCE THERE IS A CLEAR DIST INCTION BETWEEN THE INTER - CORPORATE DEPOSIT S VIS A VIS LOANS/ADVANCES, ICD CANNOT BE CONSID ERED TO BE INCLUDED WITHIN THE AMBIT OF LOANS AND ADVANCES AS HELD BY MUMBAI ITAT IN THE CASE OF BOMBAY OIL INDUSTRIAL LTD. V. DCIT APPEAL NO ITA N O . 2985 /M/ 2005 DATED: JANUARY 22, 2009. THE LEGISLATURE INTENDED THAT THE PROVISION OF THE SECTION 269SS AND 269T BE APPLICABLE TO LOANS AS WELL AS DEPOSITS. IT IS CLEAR FROM THE PROVISIONS OF SECTION 269SS AND 269T THAT LEGISLATURE MAINTAINS A DISTINCTION B ETWEEN LOANS AND DEPOSITS. THE ACT HAS DELIBERATELY USED THE WORD 'DEPOSITS' DISTINCTLY WHEREVER IT INTENDED TO APPLY THE CONDITIONS MENTIONED IN THE SAID SECTIONS TO THE AMOUNTS FORWARDED AS DEPOSITS. SECTION 2(22)(E) OF THE INCOME TAX ACT 1961, HAS DEL IBERATELY EXCLUDED THE WORD 'DEPOSIT' WHILE CREATING A LEGAL FICTION IN DEEMING PAYMENTS BY WAY OF LOANS AND ADVANCES AS DIVIDENDS. HAD THE LEGISLATURE INTENDED TO TAX DEPOSITS AS DIVIDENDS, IT WOULD HAVE INCLUDED DEPOSITS ALONG WITH THE EXISTING LOAN AND ADVANCES WITHIN THE AMBIT OF DEEMED DIVIDEND. 4.4 THE AO, HOWEVER, DISMISSED THE SUBMISSIONS BY STATING THAT MFPPL HAS CONSISTENTLY SHOWN THE ADVANCE TO GROUP CONCE RN S AS LOANS UNDER THE HEAD 'LOANS AND ADVANCES'. THE AO FURTHER OBSERVED THAT THE AFORES AID MUMBAI ITAT RULING IS NOT APPLICABLE TO THE ASSESSEE AS THE LENDING COMPANY MFPPL HAS ITSELF INCLUDED THE ADVANCE MADE UNDER 'LOANS AND ADVANCES' TREATING IT AS A ITA NO. 4517 / 13 6 PURE LOAN. HE CONCLUDED THAT THE ARGUMENT OF AMOUNT ADVANCED IS ICD DOES NOT HOLD GOOD AS THE ASSESSEE MFPPL IS NOT IN THE BUSINESS OF MONEY LENDIN G. 7. IT WAS SUBMITTED BEFORE THE AO THAT THE PROVISIONS OF SECTION 2(22)(E) COVER TRANSACTIONS IN THE NATURE OF 'LOANS AND ADVANCES' , IT IS PERTINENT TO EVALUATE THE TRUE CHARACTER OF THE AMOUNT S ADVANCED BY MFPPL TO THE RELATED PARTIES. WE HAVE DEALT WITH EACH OF THE AFORESAID ENTITIES SEPARATELY IN THE ENSUING PARAGRAPHS . JMJ INFRASTRUCTURE PVT LTD. (JIPL) DURING THE FINANCIAL YEAR ENDED 31 MARCH 2008, MFPPL ADVANCED A SUM OF RS 8 CRORES TO JIPL AS AN I CD ON 28 DECEMBER 2007. A BOARD RESOLUTION OF MFPPL DATED FF' DECEMBER 2007 IS ENCLOSED IN PAGES _ TO _ INDICATING THAT ICD OF RS 8 CRORES IS TO BE MADE TO JIPL. 4.8 GIVEN THAT MFPPL HAD THE INTENTION OF INVESTING IN EQUITY SHARES OF JIPL, TH E SAID ICD WAS CONVERTED INTO SHARE APPLICATION MONEY ON T' APRIL 2008. A BOARD RESOLUTION TO THAT EFFECT IS ENCLOSED HEREWITH IN PAGES _ TO _ EVIDENCING THE SAID CONVERSION. ACCORDINGLY , THE REAL INT E NTION AND THE NATU R E OF SUCH DEPOSIT IS FOR THE PURPO SE OF INVESTING IN EQUITY SHARES OF JIPL. GIVEN THAT SUCH DEPOSIT IS IN THE NATURE OF SHARE APPLICATION MONEY TO JIPL, THE SAME S HOULD NOT BE COVERED UNDER THE PROVIS I ONS OF SECTION 2(22)(E) OF THE ACT . IT IS RELEVANT TO EXAMINE AS TO WHAT CONSTITUTES LOA NS AND ADVANCE FOR THE PURPOSE OF APPLICATION OF SECTION 2(22)(E). A LOAN MEANS A LENDING DELIVERY BY ONE PARTY TO AND RECEIPT BY ANOTHER PARTY OF SUM OF MONEYS UPON AGREEMENT, EXPRESS OR IMPLIED, TO REPAY WITH OR WITHOUT INTEREST. FOR LOAN, THERE MUST BE A LENDER, A BORROWER, A THING LOANED FOR USE, AS WELL AS A CONTRACT BETWEEN THE PARTIES FOR THE RETURN OF THE THING LOANED. THE EXPRESSION 'ADVANCE' MEANS SOMETHING WHICH IS DUE TO A PERSON, BUT WHICH IS PAID TO HIM AHEAD OF TIME WHEN IT IS DUE TO BE PAID. 4.11 IT IS ALSO RELEVANT TO EXAMINE THE POINT OF DISTINCTION BETWEEN A DEPOSIT AND LOAN. WHILE DRAWING A DISTINCTION BETWEEN THE WORDS 'DEPOSIT' AND 'LOAN', IT MAY BE NOTICED THAT ARTICLES 19 AND 21 OF THE LIMITATION ACT, 1963 FIX THE PERIOD WITHIN WHIC H SUIT FOR RECOVERY OF LOAN CAN BE FILED. ARTICLE 22 DEALS WITH THE PERIOD OF LIMITATION FOR SUIT FOR MONEY ON ACCOUNT OF DEPOSIT. THE STARTING PERIOD OF LIMITATION UNDER ARTICLES 19 AND 21, ON THE ONE HAND, AND ARTICLE 22, ON THE OTHER, ARE DIFFERENT. UND ER ARTICLES 19 AND 21, THE CAUSE OF ACTION IN ITA NO. 4517 / 13 7 THE CASE OF MONEY LENT ARISES FROM THE DATE OF LOAN, WHEREAS UNDER ARTICLE 22, THE CAUSE OF ACTION IN THE CASE OF 8 DEPOSIT ARISES FROM THE DATE OF DEMAND. THEREFORE, IT IS NECESSARY TO DISTINGUISH A DEPOSIT FR OM 8 MERE LOAN. 4.12 WE RELY ON THE FOLLOWING JUDICIAL PRECEDENTS WHEREIN DISTINCTION BETWEEN A DEPOSIT, LOANS AND ADVANCES IS HIGHLIGHTED: BAIDYA NATH PLASTIC INDUSTRIES (P.) LTD. V ITO [1998J 230 ITR 522 (DELHI) THE DISTINCTION BETWEEN 'LOAN' AND ' DEPOSIT' IS THAT IN THE' CASE OF FORMER IT IS ORDINARILY THE DUTY OF THE DEBTOR TO SEEK OUT THE CREDITOR AND TO REPAY THE MONEY ACCORDING TO THE AGREEMENT AND IN THE CASE OF THE LATTER, IT IS GENERALLY THE DUTY OF THE DEPOSITOR TO GO TO THE BANKER OR THE D EPOSITEE, AS THE CASE MAY BE, AND MAKE A DEMAND FOR IT. THE PROVISIONS OF SECTION 269T, READ WITH SECTION 276E, ARE PENAL IN NATURE AND MUST BE STRICTLY CONSTRUED. SINCE THE LEGISLATURE SPECIFICALLY USED THE WORD 'DEPOSIT' IN CONTRADISTINCTION TO THE TER M 'LOAN', THE PROVISIONS WOULD ONLY BE ATTRACTED IF THE REPAYMENT HAS BEEN MADE IN RESPECT OF A DEPOSIT. THE MEANING OF THE WORD 'DEPOSIT' OCCURRING IN SECTION 269T CANNOT BE STRETCHED TO INCLUDE LOAN. DIRECTOR OF INCOME - TAX (EXEMPTION) V. ALARIPPU [2000 J 244 ITR 358 (DELHI) DEPOSIT MEANS THAT WHICH IS PLACED ANYWHERE, AS IN ANYONE'S HANDS FOR SAFE - KEEPING, SOMETHING ENTRUSTED TO THE CARE OF ANOTHER. A LOAN, ON THE OTHER HAND, IS GRANTING TEMPORARY USE. OF MONEY, OR TEMPORARY ACCOMMODATION. THE WORD 'DE POSIT' DOES NOT COVER TRANSACTION OF LOAN WHICH CAN BE MORE APPROPRIATELY DESCRIBED AS DIRECT BAILMENT. THE ESSENCE OF DEPOSIT IS THAT THERE MUST BE A LIABILITY TO RETURN IT TO THE PARTY BY WHOM OR ON WHOSE BEHALF HAS BEEN MADE ON FULFILLMENT OF CERTAIN CO NDITIONS. IN THE COMMERCIAL SENSE, THE TERM IS USED TO INDICATE THE AFORESAID TRANSACTION AS DEPOSIT OF MONEY FOR EMPLOYMENT, IN BUSINESS, DEPOSITS FOR VALUE TO INITIATE SECURITY FOR DEPOSIT OF TITLE DEEDS, SIMILAR DOCUMENTS AS SECURITY FOR LOAN, DEPOSIT O F MONEY BILLS IN A BANK IN THE ORDINARY COURSE OF BUSINESS OF CURRENT ACCOUNT AND DEPOSITS OF A SUM AT INTEREST AT A FIXED DEPOSIT IN A BANK 4.13 BASED ON THE ABOVE DISTINCTION, SHARE APPLICATION MONEY, AT THE MOST, COULD BE REGARDED AS A DEPOSIT AND THE REFORE, IS DISTINCT FROM LOAN OR ADVANCE. RELIANCE IS PLACED ON THE FOLLOWING RULINGS IN SUPPORT OF OUR CONTENTION THAT SHARE APPLICATION MONEY CANNOT BE CONSIDERED AS LOAN OR ADVANCE FOR THE PURPOSE OF ATTRACTING PROVISIONS OF DEEMED DIVIDEND UNDER SECTIO N 2(22)(E) OF THE ACT. AR D EE FINVEST (P.) LTD. V DC LT [2001J 791TD 547 (DELHI) ITA NO. 4517 / 13 8 IN THE INSTANT CASE THE ASSESSEE - COMPANY RECEIVED APPLICATION MONEY FOR THE ALLOTMENT OF SHARES. THERE WAS NOTHING ON RECORD TO INDICATE THAT APPLICATION MONEY WAS RECEIVED OR ALLOTMENT OF SHARES WAS MADE CONTRARY TO THE PROVISIONS OF THE COMPANIES ACT, 1956. THE AMOUNT WAS REFLECTED AS SUCH IN THE BALANCE SHEET. ACCOUNTS WERE PREPARED PERFECTLY IN ACCORDANCE WITH THE NORMS SET OUT UNDER THE COMPANIES ACT. THESE WERE FILED WI TH THE REGISTRAR OF COMPANIES. IT IS A SETTLED RULE OF INTERPRETATION OF A FICTION THAT THE COURT SHOULD ASCERTAIN FOR WHAT PURPOSE THE FICTION IS CREATED AND AFTER ASCERTAINING THE PURPOSE THE COURT HAS TO ASSUME ALL FACTS WHICH ARE INCIDENTAL TO THE GI VING EFFECT TO THAT FICTION. IT WILL NOT BE GIVEN A WIDER MEANING THAN WHAT IT PURPORTS TO DO. LAW DEALING WITH FICTION RELATES TO THAT BRANCH OF JURISPRUDENCE WHICH SHOULD BE NARROWLY WATCHED, JEALOUSLY REGARDED AND NEVER TO BE PRESSED BEYOND ITS TRUE LIM ITS. HENCE, THE RECEIPT FROM HSPL WAS IN THE NATURE OF SHARE APPLICATION MONEY AND COULD NOT BE CONSTRUED LOAN OR ADVANCE. AS SUCH, THE ASSESSEE'S CASE FELL BEYOND THE KEN OF SECTION 2(22)(E) AND THE ADDITION WAS, ACCORDINGLY, DELETED. CIT VS. SUNIL CH OPRA [2011] 201 TAXMAN 316 (DELHI ITA T) THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS DELETED THIS ADDITION ON THE GROUND THAT M / S. NATIONAL CAPITAL REGION ELECTRONICS PVT. LTD. BAD GIVEN SHARE APPLICATION MONEY FOR THE PURCHASE OF SHARES IN M / S. NOIDA PROMOTERS AND DEVELOPERS PVT. LTD. ACCORDING TO THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) SHARE APPLICATION MONEY CANNOT BE TREATED AS LOAN! ADVANCE IN THE CONTEXT OF SECTION 2(22) (E) OF THE ACT. IN SUPPORT OF ITS FINDING THE LEARNED FIRST A PPEL L ATE AUTHORITY HA S RELIED UPON THE ORDER OF THE I NCOME - T A X APPELLATE TRIBUNAL IN THE CASE OF ARDEE FINVEST P. LTD. V. DY. CIT [2001J 79 ITD 547 (DELHI). WE UPHOLD THE DELETION OF RS. 13 LAKHS WHICH WAS RECEIVED BY THE COMPANY WHERE THE ASSESSEE IS SUBS TANTIALLY INTERESTED FROM M / S. NATIONAL CAPITAL REGION ELECTRONICS PVT. LTD. AS SHARE APPLICATION MONEY. CIT VS. I.P. INDIA PVT. LTD. [2012J 204 T AXMAN 368 (DELHI ITA T) 4.14 PROVISIONS OF SECTION 2(22)(E) CREATE A DEEMING FICTION. AS DISCUSSED IN THE ASSESSMENT PROCEEDINGS, THE SCOPE AND AMBIT OF THE WORD 'DIVIDEND' HAS BEEN ENLARGED TO BRING WITHIN ITS SWEEP CERTAIN PAYMENTS MADE BY A COMPANY AS PER THE SITUATIONS ENUMERATED IN THE SECTION. SUCH A DEEMING FICTION WOULD NOT BE GIVEN A WIDER MEANING TH AN WHAT IT PURPORTS TO DO. THE PROVISIONS WOULD NECESSARILY BE ACCORDED STRICT INTERPRETATION AND THE AMBIT OF THE FICTION WOULD NOT BE PRESSED BEYOND ITS TRUE LIMITS. ITA NO. 4517 / 13 9 4.15 IN VIEW OF THE ABOVE, PROVISIONS OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) SHOULD NOT APPLY TO THE SHARE APPLICATION MONEY RECEIVED BY JIPL FROM MFPPL. 4.1 6 WITHOUT PREJUDICE TO THE ABOVE, WHERE YOUR HONOUR DOES NOT ACCEPT THE CONTENTION THAT THE AFORESAID AMOUNT IS IN THE NATURE OF SHARE APPLICATION MONEY, WE SUBMIT THAT THE SAME IS IN THE NATURE OF AN ICD. 4.17 AS DISCUSSED IN AFORESAID PARAGRAPHS, A DEPOSIT IS DISTINCT FROM LOANS AND ADVANCES. BASED ON THE BOARD RESOLUTION DATED 6 DECEMBER 2007, YOUR HONOUR WILL APPRECIATE THE FACT THAT THE ADVANCE IS IN THE NATURE OF AN INTER CO RPORATE DEPOSIT. THERE IS NO STIPULATION AS TO THE REPAYMENT OF THE SAID ICD. WE ALSO HEREBY SUBMIT LEDGER ACCOUNTS OF MFPPL IN THE BOOKS OF JIPL FOR AY 2008 - 09 AND AY 2009 - 10 (PAGES TO - ) EVIDENCING THE RECEIPT OF SHARE APPLICATION MONEY/ICD WITHOUT ANY REPAYMENT. 4.18 AS DISCUSSED ABOVE, ONE OF THE ESSENTIAL CHARACTERISTIC OF A LOAN IS THAT THE BORROWER SHOULD HAVE AN OBLIGATION FOR REPAYMENT WITHIN STIPULATED PERIOD OF TIME. HOWEVER, IN THE INSTANT CASE, JIPL HAS NO SUCH OBLIGATION FOR REPAYMENT. 4. 19 IN THE SUBMISSIONS MADE BEFORE THE LEARNED AO, THE APPELLANT HAD RELIED ON THE CASE OF UTKARSH FINANCE (P) LTD. WHEREIN IT WAS HELD THAT INTEREST ON INTER - CORPORATE DEPOSITS ARE NOT CHARGEABLE TO INTEREST TAX, AS THE DEPOSITS ARE NOT IN THE NATURE OF LO AN OR ADVANCES. IT HELD AS UNDER: 4.20 SINCE THERE IS A CLEAR DISTINCTION BETWEEN THE INTER - CORPORATE DEPOSITS VIS A VIS LOANS/ADVANCES, ICD CANNOT BE CONSIDERED TO BE INCLUDED WITHIN THE AMBIT OF LOANS AND ADVANCES AS HELD BY MUMBAI ITAT IN THE CASE OF BOMBAY OIL INDUSTRIAL LTD. V. DCIT APPEAL NO I T A N O . 2985 / M / 2005 DATED: JANUARY 22, 2009. 4.21 THE LEARNED AO HAS HELD THAT THE AFORESAID MUMBAI ITAT RULING IN THE CASE OF BOMBAY OIL INDUSTRIAL LTD DOES NOT APPLY TO THE FACTS OF THE CASE AS MFPPL HAD REF LECTED THE ADVANCE UNDER 'LOANS AND ADVANCES IN THE BALANCE SHEET TREATING AS A PURE LOAN. IN THIS CONNECTION, WE WISH TO INFORM YOUR HONOUR THAT THE DOCTRINE OF SUBSTANCE OVER FORM SHALL APPLY IN THIS CASE. THE REAL CHARACTER OF THE ADVANCE AS EVIDENCED B Y THE BOARD RESOLUTION IS ICD AND NOT A LOAN. 4.22 IT IS SETTLED - POSITION THAT THE ENTRIES IN THE BOOKS OF ACCOUNTS ARE NOT CONCLUSIVE OF THE TREATMENT UNDER THE INCOME - TAX LAWS. ACCORDINGLY, MERELY REFLECTING THE AMOUNT UNDER THE HEAD LOANS AND ADVANCES DOES NOT CHANGE THE TRUE CHARACTER OF THE ADVANCE. IN THIS CONNECTION, WE PLACE RELIANCE ON THE FOLL OWING JUDICIAL PRECEDENTS: ITA NO. 4517 / 13 10 4.23 IN VIEW OF THE ABOVE DISCUSSIONS, PROVISIONS OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT SHOULD NOT APPLY TO THE ICD PLACED BY MFFPL TO JIPL OF RS 8 CRORES. ACCORDINGLY, LEARNED AO ERRED IN APPLYING PROVISIONS OF SECTION 2(22)(E) TO THE AFORESAID TRANSACTION AND THE DISALLOWANCE BEING BAD IN LAW NEEDS TO BE DELETED. SJJ FOOD PRODUCTS PVT LTD (SFPPL) 4.24 FROM TH E TABLE PROVIDED IN THE AFORESAID PARAGRAPH, YOUR HONOUR WILL APPRECIATE THE FACT THAT SHAREHOLDING OF THE APPEL L ANT IN SFPPL IS ONLY 14.05%. THE PREREQUISITE FOR APPLICABILITY OF PROVISIONS OF SECTION 2(22)(E) OF THE ACT IS THAT THE ASSESSEE SHOULD HAVE A SUBSTANTIAL INTEREST IN THE COMPANY TO WHOM THE LENDER MAKES LOAN OR ADVANCE. 4.25 GIVEN THAT THE APPELL ANT DOES NOT HAVE SUBSTANTIAL INTEREST IN SFPPL, PROVISIONS OF SECTION 2(22)(E) SHALL NOT APPLY IN RELATION TO LOANS OR ADVANCES GIVEN BY MFPPL TO SF PPL. 4.26 ACCORDINGLY, LEARNED AO'S ACTION OF APPLYING PROVISIONS OF SECTION 2(22)(E) IN RELATION TO LOANS AND ADVANCE TO SFPPL IS BAD IN LAW AND THEREFORE, SHOULD BE DELETED. 8. BY THE IMPUGNED ORDER THE CIT(A) DELETED THE ADDITION MADE U/S.2(22)(E) AFTER HAVING FOLLOWING OBSERVATIONS : - 5.5.7 IT IS ALSO SEEN THAT THE LD. AO WAS NOT SATISFIED WITH THE PLEA MADE BY THE APPELLANT THAT THE PAYMENT TO JIPL WAS NOT IN THE FORM OF ICD. THE ONLY REASON GIVEN BY THE LD. AO WAS THAT THE SAID PAYMENT WAS REFLE CTED UNDER THE HEAD LOANS AND ADVANCES IN THE BALANCE SHEET. IN THIS REGARD IT IS IMPORTANT TO NOTE THAT THE DISCLOSURE OF ANY ITEM IN THE BALANCE SHEET OF A COMPANY IS GOVERNED BY THE SCH.VI OF THE COMPANIES ACT, 1956 AND ICD PLACED BY MFPPL WAS DISCLOSED UNDER THE HEAD LOANS & ADVANCES' AS PER THE SAID REQUIREMENT. IT IS ALSO IMPORTANT TO NOTE THAT THE REAL CHARACTER OF THE ADVANCES CANNOT BE CONCLUDED ONLY ON THE BASIS OF ENTRIES IN THE BOOKS OF ACCOUNTS. WHEREAS, THE APPELLANT HAD PRODUCED THE BOARD RES OLUTION BEFORE THE LD. AO STATING THAT THE SAID ADVANCE WAS IN THE NATURE OF ICD, LD.AO HAS NOT BROUGHT ANYTHING ON RECORD TO REPUDIATE THE CLAIM MADE. UNLESS THE SAID BOARD RESOLUTION WHICH WAS PRODUCED BEFORE THE LD. AO IS HELD TO BE FICTITIOUS OR ANTEDA TED, THE SAME CANNOT BE IGNORED BY MERELY BRUSHING IT ASIDE. IT IS SETTLED POSITION OF LAW THAT ENTRIES IN THE BOOKS OF ACCOUNTS ARE NOT CONCLUSIVE FOR THE TREATMENT UNDER THE I.T. ACT AND THE REAL CHARACTER OF THE ADVANCE HAD TO BE FOUND BY BRINGING OUT T HE CONTEMPORANEOUS EVIDENCE. I FIND THAT THE EVIDENCE IN THE FORM OF BOARD RESOLUTION IS THE ONLY CONTEMPORANEOUS EVIDENCE AVAILABLE ON RECORD TO GO TO THE ROOT OF THE REAL CHARACTER OF THE ADVANCE. AS THE BOARD OF THE ADVANCE ITA NO. 4517 / 13 11 MAKING COMPANY WANTED THE SAI D SUM TO BE TREATED AS AN ICD, IT CANNOT BE SAID THAT IT WAS MERELY IN THE NATURE OF 'LOAN' OR 'ADVANCE'. 5.5.8. HAVING HOLD SO, IT IS IMPORTANT TO NOTE THE DECISION OF JURISDICTIONAL IT AT IN THE CASE OF BOMBAY OIL INDUSTRIAL CO. LTD. IN ITA NO. 2985/ M / 05 DATED 2 2 / - 01/09 [28 SOT 383(MUM)] WHERE IT HAS BEEN HELD THAT THERE IS A CLEAR DISTINCTION BETWEEN INTER CORPORATE DEPOSIT VIS - A - VIS LOANS AND ADVANCES AND ICD CANNOT BE CONSIDERED TO BE INCLUDED WITHIN THE AMBIT OF LOANS AND ADVANCES. IN THIS REGARD IT IS ALSO IMPORTANT TO MENTION THE TWO DECISIONS OF HON'BLE DELHI HIGH COURT IN THE CASES OF BAIDYA NATH PLASTIC INDUSTRIES (P.) LTD. V ITO [1998]230 ITR 522 (DELHI)AND DI RECTOR OF INCOME TAX (EXEMPTION) VS. ALARIPPU (2000) 244 ITR 358 (DEL) WHERE IT HAS BE EN HELD THAT WHEREAS A DEPOSIT MEANS A PAYMENT WHICH IS PLACED ANYWHERE FOR SAFE KEEPING AND TRUST OR PUT IN CARE OF ANOTHER, A LOAN IS FOR GRANTING A TEMPORARY USE OF MONEY; THUS, KEEPING IN VIEW THE FACTS OBTAINING IN THE IMPUGNED CASE, I FIND THAT THE P AYMENT MADE BY MFPPL TO JIPL WAS IN THE NATURE OF ICD AND NOT IN THE NATURE OF LOAN / ADVAN CES AND HENCE PROVISION OF SEC, 2(22)(E) OF THE I.T A CT ARE NOT APPLICABLE TO THE SAME. IN VIEW OF THESE FINDINGS, THE ALTERNATE GROUND RAISED BY THE LD. AR THAT I N T HE IMMEDIATE SUCCEEDING ASSESSMENT YEAR THE SAID PAYMENT WAS CONVERTED INTO SHARE APPLICATION MONEY NEED NOT BE TAKEN UP FOR ADJUDICATION AS THIS GROUND WAS NOT RAISED BY THE APPELLANT BEFORE THE LD. AO. 5.5.9. IN COMMISSIONER OF INCOME - TAX V. ARVIND KUM AR JAIN [2012] 18 TAXMANN.COM 132 (DELHI) IT HAS BEEN HELD AS UNDER: 4. IT IS NOT IN DISPUTE THAT SECTION 2 (22) (E) OF THE ACT CREATES A FICTION OF MAKING SUCH LOAN AND ADVANCE UNDER CIRCUMSTANCES, AS DEEMED DIVIDEND, WOULD BE ATTRACTED ONLY WHEN SOME L OAN OR ADVANCE IS GIVEN BY THE COMPANY TO ANOTHER PERSON WHO IS HAVING PARTICULAR SHAREHOLDING IN THE SAID COMPANY. HOWEVER, IN THE PRESENT CASE, TWO AUTHORITIES BELOW HAVE ARRIVED AT A FINDING OF FACT THAT THE AMOUNT IN QUESTION REPRESENTED THE CREDIT BAL ANCE AS A RESULT OF TRANSACTIONS BETWEEN A & A PERIODICALS AND THE ASSESSEE ON ACCOUNT OF BUSINESS RELATIONS AND P AYMENT WAS NOT IN THE NATURE OF LOAN OR ADVANCE'. 5. IN C LT V. RAJ KUMAR [2009J 318 ITR 4621181 TAXMAN 155, THIS COURT HAS HELD THAT IF THE PAYMENTS ARE MADE BY SUCH A COMPANY TO EVEN ITS SHAREHOLDER HAVING SUBSTANTIAL INTEREST BUT ARE THE RESU LT OF BUSINESS TRANSACTIONS BET WEEN TH E P A RTIES, THEN SUCH PAYMENTS CANNOT BE TREATED AS LOAN OR ADVANCE AND THE MONEY SO RECEIVED CANNOT 'BE TREATED AS DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2 (22)(E) OF THE ACT. THE FOLLO WING DISCUSSION IN THE SAID JUDGMENT SPELLS OUT THE CONDITIONS WHICH ARE TO BE FULFILLED BEFORE THE AMOUNT PAID IS TREATED AS DEEMED DIVIDEND AS WELL AS THE PRINCIPLE THAT TRADE ADVANCE DOES NOT FALL WITHIN THE AMBIT OF PROVISIONS OF SECTION 2 (22) (E) OF THE '(I) THE COMPANY MAKING THE PAYMENT IS ONE IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED. ITA NO. 4517 / 13 12 (II) MONEY SHOULD BE PAID BY THE COMPANY TO A SHAREHOLDER HOLDING NOT LESS THAN TEN PER CENT (10%) OF THE VOTING POWER OF THE SAID COMPANY. IT WOULD MAKE NO DIFFERENCE IT THE PAYM ENT WAS OUT OF THE ASSETS OF THE COMPANY OR OTHERWISE. (III) THE M ONEY SHOULD BE PAID EITHER BY WAY OF AN ADVANCE OR LOAN OR IT MAY BE 'ANY PAYMENT WHICH T HE COMPANY MAY MAKE ON BEHALF OF, OR FOR THE INDIVIDUAL BENEFIT OF ANY SHARE HOLDER OR ALSO TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH IT IS SUBSTAN TI ALLY INTERESTED. (IV) AND, LASTLY, THE LIMITING FACTOR BEING THAT TH ESE PAYMENTS MUST BE TO THE EXTENT OF ACCUMULATED PROFITS, POSSESSED BY SUCH A COMPANY. ' THEREFORE, IF THE SAID BACKGROUND IS KEPT IN MIND, IT IS CLEAR THAT SUB - CLAUSE (E) OF SECTION 2(22) OF THE ACT, WHICH IS PARI - MATERIA WITH CLAUSE (E) OF SECTION 2(6 A) OF THE 1922 ACT, PLAINLY SEEKS TO BRING WITHIN THE TAX NET ACCUMULATED PROFITS WHICH ARE DISTRIBUTED BY CLOSELY HELD COMPANIES TO ITS SHAREHOLDERS IN THE FORM OF LOANS. THE PURPOSE BEING THAT PERSONS WHO MANAGE SUCH CLOSELY HELD COMPANIES SHOULD NOT ARR ANGE THEIR AFFAIRS IN A MANNER THAT THEY ASSIST THE SHAREHOLDERS IN AVOIDING THE PAYMENT OF TAXES BY HAVING THESE COMPANIES PAY OR DISTRIBUTE, WHAT WOULD LEGITIMATELY BE DIVIDEND IN THE HANDS OF THE SHAREHOLDERS, MONEY IN THE FORM OF AN ADVANCE OR LOAN. IF THIS PURPOSE IS KEPT IN MIND THEN, IN OUR VIEW, THE WORD 'ADVANCE' HAS TO BE READ IN CONJUNCTION WITH THE WORD 'LOAN'. USUALLY ATTRIBUTES OF A LOAN ARE THAT IT INVOLVES POSITIVE ACT OF LENDING COUPLED WITH ACCEPTANCE BY THE OTHER SIDE OF THE MONEY AS LO AN: IT GENERALLY CARRIES AN INTEREST AND THERE IS AN OBLIGATION OF RE - PAYMENT. ON THE OTHER HAND, IN ITS WIDEST MEANING THE TERM 'ADVANCE' MAYOR MAY NOT INCLUDE LENDING. THE WORD 'ADVANCE' IF NOT FOUND IN THE COMPANY OF OR IN CONJUNCTION 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 NOSCIT UR 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 FOU ND IN IMMEDIATE CONNECTION WITH THEM' AND OUR SUPREME COURT IN THE CASE OF ROHIT PULP & PAPER MILLS LTD. V. CCE, AIR 1991 SC 754 AND STATE OF BOMBAY V. HOSPITAL MAZDOOR SABHA, AIR 1960 SC 610. IT IS IMPORTANT TO NOTE THAT ROHIT PULP (SUPRA) WAS THE CASE DEALING WITH TAXATION. IN BRIEF IN THE SAID CASE THE ASSESSEE WAS SEEKING TO TAKE BENEFIT OF AN EXEMPTION NOTIFICATION. THE DEPARTMENT DENIED THE BENEFIT OF THE NOTIFICATION ON THE GROUND THAT THE PAPER ITA NO. 4517 / 13 13 MANUFACTURED BY THE ASSESSEE WAS COATED PAPER TO WHIC H AS PER THE PROVISO TO THE SAID NOTIFICATION THE CONCESSION WAS NOT AVAILABLE. THE SUPREME COURT IN COMING TO THE CONCLUSION THAT THE ASSESSEE'S CASE DID NOT FALL WITHIN THE PROVISO AND WAS THUS ENTITLED TO THE BENEFIT OF THE NOTIFICATION APPLIED THE RULE OF CONSTRUCTION OF NOSCITUR A SOCIIS. IMPORTANTLY, THE BROAD PRINCIPLES WHICH EMERGE FROM THE JUDGMENT OF THE SUPREME COURT WITH REGARD TO THE APPLICABILITY OF THE SAID RULE OF CONSTRUCTION ARE BRIEFLY AS FOLLOWS: (I) DOES THE TE RM IN ISSUE HAVE MORE THAN ONE MEANING ATTRIBUTED TO IT I.E., BASED ON THE SETTING OR THE CONTEXT ONE COULD APPLY THE NARROWER OR WIDER MEANING; (H) ARE WORDS OR TERMS USED FOUND IN A GROUP TOTALLY 'DISSIMILAR' OR IS THERE A 'COMMON THREAD' RUNNING THROUGH THEM; (III) THE P URPOSE BEHIND INSERTION OF THE TE RM . LET'S EXAMINE AS TO WHETHER BASED ON THE AFORESAID TESTS THE SAID RULE OF CONSTRUCTION 'NOSCITUR A SOCIIS' OUGHT TO BE APPLIED IN THE INSTANT CASE. (I) THE TE RM 'ADVANCE' HAS UNDOUBTEDLY MORE THAN ONE MEANING DEPEND ING ON THE CONTEXT IN WHICH IT IS USED; (H) BOTH THE TERMS, THAT IS, ADVANCE OR LOAN ARE RELATED TO THE 'ACCUMULATED PROFITS' OF THE COMPANY; (III) AND LAST BUT NOT THE LEAST THE PURPOSE BEHIND INSERTION OF THE TERM ADVANCE WAS TO BRING WITHIN THE TAX NET PAYMENTS MADE IN GUISE OF LOAN TO SHAREHOLDERS BY COMPANIES IN WHICH THEY HAVE A SUBSTANTIAL INTEREST SO AS TO AVOID PAYMENT OF TAX BY THE SHAREHOLDERS; KEEPING THE AFORESAID RULE IN MIND WE ARE OF THE OPINION THAT THE WORD 'ADVANCE' WHICH APPEARS IN THE COMPANY OF THE WORD 'LOAN' COULD ONLY MEAN SUCH ADVANCE WHICH CARRIES WITH IT AN OBLIGATION OF REPAYMENT. 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 AMBI T OF THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THIS INTERPRETATION WOULD ALLOW THE RULE OF PURPOSIVE CONSTRUCTION WITH POSCITUR A SOCIIS, AS WAS DONE BY THE SUPREME COURT IN THE CASE OF LIC OF INDIA VS. RETD. LIC OFFICER ASSN. (2008) 3 SCC 321. 6. LE ARN ED COUNSEL FOR THE APPELLANT HAMMERED THE FACT THAT THE AMOUNT WAS SHOWN BY THE ASSESSEE HIMSELF IN HIS BOOKS OF ACCOUNTS AS 'UNSECURED LOAN' AND, THEREFORE, THE ORDER OF THE ASSESSING OFFICER WAS CORRECT. ITA NO. 4517 / 13 14 7. IT IS TRITE LAW THAT MERE NOMENCLATURE OF ENTRY IN THE BOOKS OF ACCOUNT IS NOT DETERMINATIVE OF THE TRUE NATURE OF TRANSACTION. SEE CIT V. INDIA DISCOUNT CO. LTD. [1970] 751TR 191 (SC), CIT V. PROVINCIAL FARMERS (P.) LTD. [1977]10SITR 219 (CA/) AND K.C.P LTD. V. CIT [2000] 2451TR 421 /112 TAXMAN 6 6 (SC). IN THE PRESENT CASE AFTER GOING THROUGH THE RELEVANT EVIDENCE AS WELL AS CURRENT ACCOUNT MAINTAINED BETWEEN THE PARTIES, IT HAS BEEN ESTABLISHED THE: THE PAYMENT MADE WERE THE RESULT OF TRADING TRANSACTION BETWEEN THE PARTIES AND THE AMOUNT WAS NOT GIVEN BY WAY OF LOAN OR ADVANCE. 8 . WE THUS, FIND THAT NO QUESTION OF LAW ARISES IN THIS APPEAL WHICH IS ACCORDINGLY DISMISSED.' ( EMPHASIS SUPPLIED) 5.5.10 SIMILARLY, IN THE CASE OF SEAMIST PROPERTIES (P.) LTD. V. ITO [2005] 1 SOT 142 (MUM.). IT H AS BEEN HELD AS FOLLOWS: '15. IN THE FOLLOWING CASES, IT HAS BEEN HELD TO THE EFFECT THAT A DEEMING FICTION SHOULD BE CARRIED TO ITS LOGICAL END, IN ACCORD WITH THE PURPOSE OF ITS ENACTMENT AND NO FURTHER: (I) CIT V. P.K. BADIANI [1970} 76 ITR 369 (BOM. ) (II) CIT V. HINDUSTAN PETROLEUM CORPN. LTD. [1991] 187 ITR 11 (BOM.) (III) CIT V. AMARCHAND B. DOSHI [1992] 1941TR 562 (BOM.), (IV) CA L TEX OIL REFINING (INDIA) LTD. V. CIT [1993] 2021TR 375 3 (BOM.) (V) CIT V. SHRISHAKTI TRADING CO. [1994] 2071TR 442 ' (BOM.) IN THE CASE BEFORE US, HOWEVER, THE TAXING AUTHORITIES HAVE STRETCHED THE DEEMING FICTION, CONTAINED IN SECTION 2(22)(E) BEYOND ITS OUTER REACHES IN APPLYING THE SAID PROVISION TO THE ASSESSEE WHO CLEARLY DOES NOT COME WITHIN ITS FOUR - CORNERS. 16. THE HON'BLE SUPREME COURT HAS HELD IN CIT V. SHAAN FINANCE (P.) LID. [1998]231 ITR 3081, INTER ALIA THAT IN INTERPRETING A FISCAL STATUTE, THE COURT CANNOT PROCEED TO MAKE GOOD THE DEFICIENCIES IF THERE BE ANY. IT MUST INTERPRET THE STATUTE AS IT STAN DS AND IN CASE OF DOUBT , IN A MANNER FAVOURABLE TO THE TAXPAYER. SO, WHILE TAXING NOTIONAL INCOME, THE PROVISIONS RELATING TO DEEMED DIVIDEND, LIKE THE ONES COMPRISED IN SECTION 2(22)(E) OF THE INCOME TAX ACT, NEED TO BE INTERPRETED NOT LOOSELY, AS THE LOW ER AUTHORITIES HAVE CHOSEN DO TO, BUT STRICTLY. 17. THAT DEPOSITS ARE NOT LOANS STANDS WELL SETTLED BY THE FOLLOWING JUDICIAL PRONOUNCEMENTS, AMONGST OTHERS: (I) A. M. SHAMSUNDER V. UNION OF INDIA [2000J 244 ITR 2662 (MAD.) (II) CIT V. EETACHI AGENCIES [2001J 248 ITR 5?53 (BOM.) (III) BAIDYA NATH PLASTIC INDUSTRIES (P.) LTD. V. K.L. ANAND, ITO [1998J 230 ITR 522 (DELHI) (IV) ITO V. PRADIP KUMAR RATHI [2003J 85 ITO 309 (GAUHATI) (V) INDUSTRIAL ENTERPRISES V. DY. CIT [2000J 73 ITD 252 (HYD.) ITA NO. 4517 / 13 15 (VI) BALA JI TRADERS V. DY. CIT [2001J 781TD 368 (PUNE). THE SUBORDINATE AUTHORITIES HAVE ERRED IN INTERPRETING THE DEPOSIT IN QUESTION TO MEAN A LOAN. 18. IT IS ALSO WELL ESTABLISHED IN THE FOLLOWING DECISIONS THAT A DEPOSIT IS NOT AN ADVANCE: (I) CIT V. K. S RINIVASAN [1963J 50 ITR 788 (MAD.); AND (H) M.A. JINDAL V. CIT [1987J 1641TR 28' (CAL.) AN ADVANCE, AS OPPOSED TO A DEPOSIT, IS SOMETHING PAID TO A PERSON BEFORE IT IS DUE. HERE, HOWEVER, THE AMOUNT IN QUESTION WAS CERTAINLY NOT PAID BEFORE IT WAS DUE. THE AGREEM ENT BETWEEN THE ASSESSEE AND SIL VASA IS CATEGORICAL IN THIS REGARD. ALSO, THE FACTUM OF SUCH PAYMENT IN THE MANNER ALLEGED IS NOT REFUTED BY THE REVENUE. THE AUTHORITIES HAVE JUST DUBBED IT AS AN ADVANCE WHICH BY NO MEANS IT IS. 19. STILL FURTH ER, THE DEPARTMENT HAS NOT MADE OUT ANY CASE OF AVOIDANCE OF TAX AT THE HANDS OF THE ASSESSEE. THAT BEING SO, THE DECISION IN MCDOWELL [1985J 154 ITR 148 (SC) HAS NO APPLICATION. THERE IS NO COLOURABLE DEVISE OR SUBTERFUGE CONTRIVED BY THE ASSESSEE. 20. SO, THE CASE LOOKED AT FROM ANY ANGLE, THE PROVISIONS OF SECTION 2(22)(E) HAVE BEEN MISCONSTRUED AND MISAPPLIED. THE AMOUNT OF RS.2,33,31,427/ - WAS RECEIVED BY THE ASSESSEE COMPANY FROM M/S SILVASA ESTATES PVT. LTD. IN PURSUANCE OF THE MEMORANDUM OF UNDER STANDING ARRIVED AT BETWEEN THEM ON 9 - 2 - 1997, AS A DEPOSIT AND NOT AS A LOAN OR AN ADVANCE. 9. AGAINST THE ABOVE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 10. LD. DR RELIED ON THE ORDER OF AO AND CONTENDED THAT THE CIT(A) WAS NOT CORRECT IN HO LDING THAT ICD IS NOT COVERED BY THE DEFINITION OF THE LOAN AND ADVANCES, THEREBY DELETING THE ADDITION MADE U/S.2(220(E) OF THE ACT. 11. ON THE OTHER HAND, LD. AR RELIED ON THE ORDER OF COORDINATE BENCH IN THE CASE OF M/S IFB AGRO INDUSTRIES LTD., ITA NO. 1721/KOL/2012, WHEREIN IT WAS HELD THAT INTER CORPORATE DEPOSIT ARE NOT COVERED BY THE MISCHIEF OF ITA NO. 4517 / 13 16 PROVISION OF SECTION 2(22)(E) OF THE ACT. THE PRECISE OBSERVATION OF THE TRIBUNAL ARE AS UNDER : - 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT THE OUTSET , A PERUSAL OF THE FACTS IN THE ASSESSEES CASE CLEARLY SHOW THAT THE DISPUTE IN THE APPEAL PRIMARILY REVOLVES AROUND THE ISSUE AS TO WHETHER THE INTERCORPORATE DEPOSITS RECEIVED BY THE ASSESEE FROM M/S. IFB IS A LOAN OR ADVANCE OR IS A DEPOSIT. ADMI TTEDLY, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT REFERS TO ONLY LOANS AND ADVANCES IT DOES NOT TALK OF A DEPOSIT. THE FACT THAT THE TERM DEPOSIT CANNOT MEAN A LOAN AND THAT THE TWO TERMS LOAN AND THE TERM DEPOSIT ARE TWO DIFFERENT DISTIN CT TERMS IS EVIDENT FROM THE EXPLANATION TO SECTION 269T AS ALSO SECTION 269SS OF THE ACT WHERE BOTH THE TERMS ARE USED. FURTHER, THE SECOND PROVISO TO SECTION 269SS OF THE ACT RECOGNISES THE TERM LOAN TAKEN OR DEPOSIT ACCEPTED. ONCE IT IS AN ACCEPTED FACT THAT THE TERMS LOAN AND DEPOSIT ARE TWO DISTINCT TERMS WHICH HAS DISTINCT MEANING THEN IF ONLY THE TERM LOAN IS USED IN A PARTICULAR SECTION THE DEPOSIT RECEIVED BY AN ASSESSEE CANNOT BE TREATED AS A LOAN FOR THAT SECTION. HERE, WE MAY ALSO ME NTION THAT IN SECTION 269T OF THE ACT, THE TERM DEPOSIT HAS BEEN EXPLAINED VIDE VARIOUS CIRCULAR ISSUED BY CBDT. THUS, THE VIEW TAKEN BY THE LD. CIT(A) THAT THE INTERCORPORATE DEPOSIT IS SIMILAR TO THE LOAN WOULD NO LONGER HAVE LEGS TO STAND. A PERUSAL O F THE DECISION OF HONBLE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF GUJARAT GAS & FINANCIAL SERVICES LTD. REFERRED TO SUPRA, CLEARLY SHOWS THAT THE HONBLE SPECIAL BENCH HAD TAKEN INTO CONSIDERATION THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF HOUSING & URBAN DEVELOPMENT CORPORATION LTD. REPORTED IN 102 TTJ (DEL.)(SB) 936 TO COME TO THE CONCLUSION THAT LOANS AND DEPOSITS ARE TO BE TAKEN DIFFERENT AND DISTINCT. FURTHER, IN VIEW OF THE DECISION OF HONBLE COORDINATE BENCH OF THIS TRIB UNAL IN THE CASE OF BOMBAY OIL INDUSTRIES LTD. , REFERRED TO SUPRA, WHEREIN THE COORDINATE BENCH OF THIS TRIBUNAL HAS HELD AS FOLLOWS: 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE AUTHORITIES BELOW HAVE NOT CONTROVERTED THE CLAIM OF THE ASSESSEE COMPANY THAT THE AMOUNT RECEIVED FROM ABOVE THREE COMPANIES IS ICDS. THE AO HELD AGAINST THE ASSESSEE ONLY ON ACCOUNT THAT IT HAD FAILED TO EXPLAIN, THE INVESTMENT IS NEITHER LOAN OR ADVANCE. IT IS A SETTLED POSITION THAT DEPOSIT S CANNOT BE EQUATED WITH LOANS OR ADVANCES. THE JURISDICTIONAL HIGH COURT IN THE DURGA PRASAD MANDELIAS CASE (SUPRA) HAS NOTICED THE DISTINCTION BETWEEN DEPOSITS AND LOANS IN THE CONTEXT OF S. 370 OF THE COMPANIES ACT. THE COURT HELD AS UNDER: THERE CA N BE NO CONTROVERSY THAT IN A TRANSACTION OF A DEPOSIT OF MONEY OR A LOAN, A RELATIONSHIP OF A DEBTOR AND CREDITOR MUST COME INTO EXISTENCE. THE TERMS DEPOSIT AND ITA NO. 4517 / 13 17 LOAN MAY NOT BE MUTUALLY EXCLUSIVE, BUT NONETHELESS IN EACH CASE WHAT MUST BE CONSIDERED IS THE INTENTON OF THE PARTIES AND THE CIRCUMSTANCES. IN THE PRESENT CASE, BARRING THE ASSERTION OF THE RESPONDENT THAT THE MONEYS ADVANCED BY THE COMPANY TO THE ASSOCIATED CEMENT COMPANIES CONSTITUTE A LOAN AND OFFEND S. 370 OF THE COMPANIES ACT, THERE I S NOTHING ELSE TO SHOW THAT MONEYS HAVE BEEN ADVANCED AS A LOAN. IN THE CONTEXT OF THE STATUTORY PROVISIONS, THE WORD LOAN MAY BE USED IN THE SENSE OF A LOAN NOT AMOUNTING TO A DEPOSIT. THE WORD LOAN IN S. 370 MUST NOW BE CONSTRUED AS DEALING WITH LOAN S NOT AMOUNTING TO DEPOSITS, BECAUSE, OTHERWSE, IF DEPOST OF MONEYS WITH CORPORATE BODIES WERE TO BE TREATED AS LOANS, THEN DEPOSITS WITH SCHEDULED BANKS WOULD ALSO FALL WITHIN THE AMBIT OF S. 370 OF THE COMPANIES ACT. THEREFORE, MONEYS GIVEN BY THE COMP ANY TO THE OTHER BODIES CORPORATE IS A LOAN WITHIN THE MEANING OF S. 370 OF THE COMPANIES ACT MUST BE NEGATIVED. THEREFORE, THE PETITIONERS WOULD WELL BE ENTITLED TO THE RELIEF. SEC. 370 OF THE COMPANIES ACT, 1956 WAS SUBSEQUENTLY AMENDED TO INCLUDE DEP OSITS NTO ITS AMBIT THEREBY INDICATING THE DISTINCTION BETWEEN DEPOSITS AND LOANS/ADVANCES. THE RECENT DECISION OF THE TRIBUNAL IN THE CASE OF GUJARAT GAS FINANCIAL SERVICES LTD.S CASE (SUPRA) HAS ELABORATELY CONSIDERED THE ISSUE WHETHER INTEREST ON ICDS IS INTEREST ON LOANS OR ADVANCES AND WHETHER THE SAME IS EXIGIBLE TO CHARGEABLE INTEREST UNDER INTEREST - TAX ACT. THE TRIBUNAL AFTER CONSIDERING THE ENTIRE PRECEDENT ON THE ISSUE THOUGH IN THE CONTEXT OF THE INTEREST - TAX ACT HAD CATEGORICALLY HELD THAT INT EREST ON ICDS IS NOT AKIN TO INTEREST ON LOANS OR ADVANCES. THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL CITED SUPRA WHICH RUNS FROM PARAS 68 TO 74 IS REPRODUCED BELOW: 68. BEFORE THE AO THE ASSESSEE AS REGARDS INCOME FROM ICD THE ASSESSEE COMPANY ACCEPTED THIS INTEREST OF RS. 1,21,54,153 ALONG WITH INTEREST ON BILL DISCOUNTNG RS. 1,48,74,208 AND OTHER INTEREST OF RS. 3,66,184 CAN BE BOUGHT UNDER THE PURVIEW OF THE INTEREST - TAX ACT, 1974. HOWEVER BEFORE CIT(A) IT WAS SUBMITTED THAT THESE ARE NTER EST ON DEPOSITS AND THE NATURE IS THAT OF THE INVESTMENT AND SO INTEREST - TAX BEING LEVIABLE ON LOANS AND ADVANCES AND NOT ON FIXED DEPOSITS, THE AMOUNT WAS NOT TO BE INCLUDED. THE CIT(A) HELD: I HAVE CAREFULLY CONSIDERED THE MATTER AND FIND THAT THE DEF INITION OF INTEREST DOES NOT SPEAK OF EXCLUDING THIS AMOUNT IN ITS DEFINITION. ACCORDINGLY THEREFORE, THE INCLUSION BY THE AO OF THESE ITEMS IS FOUND JUSTIFIED AND IS UPHELD. 69. THE SUBMISSION OF THE ASSESSEE IS THAT THESE ICDS BEING NEITHER LOANS OR A DVANCES, INTEREST EARNED ON THESE IS NOT ITA NO. 4517 / 13 18 EXIGIBTE TO INTEREST TAX IN VIEW OF THE DECISION OF AHMEDABAD TRIBUNAL IN THE CASE OF UTKARSH FINCAP (P) LTD. VS. ITO (2006) 101 TTJ (AHD) 210. RELIANCE IS ALSO PLACED ON THE DECISION OF HOUSING & URBAN DEVELOPMENT CORPORATION LTD. VS. JT. CIT (2006) 102 TTJ (DEL) (SB) 936 : (2006) 5 SOT 918 (DEL)(SB), STANROSE HOLDING LTD. (ITA NO. 25/MUM/1966) AND PERSEPOLIS INVESTMENT CO. (P) LTD. (ITA NO. 51/MUM/1997). THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND SUP PORTED THE DECISION OF THE CIT(A) AND SUBMITTED THAT WHEN ASSESSEE ITSELF HAD OFFERED IT TO TAX WHERE THE QUESTION OF ALLOWING IT AS NOT TAXABLE. HE ALSO SUBMITTED THAT IT IS TAXABLE AS HETD IN BAJAJ AUTO HOLDINGS LTD. VS. DY. CIT (2005) 96 TTJ (MUMBAI) 85 6 : (2005) 95 ITD 356 (MUMBAI). 70. WE HAVE HEARD THE PARTIES AND CONSIDERED THE RIVA SUBMISSIONS. IT MIGHT BE TRUE THAT ASSESSEE HAD OFFERED IT TO TAX INITIALLY BUT HE CLAIMED IT AS NOT TAXABLE AND THEREFORE THE MATTER HAS TO BE EXAMINED ON MERITS AND T O DETERMINE AS TO WHETHER IT IS TAXABLE UNDER THE ACT. WE FIND IT IS NOT TAXABLE IN THE LIGHT OF THE DECISION IN THE CASE OF UTKARSH FNCAP (P) LTD. (SUPRA) WHEREIN AHMEDABAD BENCH OF THE TRIBUNAT AFTER CONSIDERING THE DECISION IN THE CASE OF FEDERATION OF ANDHRA PRADESH CHAMBERS OF COMMERCE & INDUSTRY & ORS. VS. STATE OF ANDHRA PRADESH & ORS. (2001) 165 CTR (SC) 672 : (2001) 247 ITR 36 (SC), CIT VS. SAHARA INDIA SAVINGS & INVESTMENT CORPORATION LTD. (2003) 185 CTR (ALL) 136 : (2003) 264 ITR 646 (ALL) AND F OLLOWING THE DECISIONS IN THE CASE OF GUJARAT INDUSTRIAL INVESTMENT CORPN. LTD. (SIC), ORIENTAL INSURANCE CO, LTD. VS. DY. CIT (2004) 82 TTJ (DEL) 1084 : (2004) 89 ITD 520 (DEL) HELD THAT INTEREST ON ICDS ARE NOT CHARGEABLE TO INTEREST - TAX, AS THE DEPOSITS ARE NOT IN THE NATURE OF LOANS OR ADVANCES. IT HELD AS UNDER: THE WORDS LOANS AND ADVANCES SHOULD BE UNDERSTOOD CONJOINTLY AND NOT IN ISOLATION. IF SO READ, THE ADVANCES WHICH ARE IN THE NATURE OF LOAN ALONE SHOULD BE COVERED IN THE TERM. ORDINARILY AN ADVANCE IS A PAYMENT BEFOREHAND AND IT DOES NOT CONNOTE, THE IDEA OF REPAYMENT. IT IS ADJUSTED WHEN THE ACTION FOR WHICH THE MONEY IS ADVANCED IS COMPLETED AND IF NOT REPAID ON EXPIRY OF THE LOAN LIKE A DEPOSIT. THE COMPANY IS NOT BOUND TO ACCEPT THE DE POSIT MADE, IF PROCEEDINGS ON THE BASIS OF THE PROSPECTUS A PERSON INTEREST TO MAKE A DEPOSIT. BY ISSUING PROSPECTUS OF A COMPANY INVITES OFFER FOR MAKING DEPOSIT AND THAT IS NOT OFFER TO RECEIVE DEPOSIT WHEREAS IN CASE OF LOAN THE ASSESSEE PRAYS FOR A LOA N. IT OFFERS TO BORROW MONEY AND ONCE THAT OFFER IS ACCEPTED, THE LENDER IS BOUND TO GIVE MONEY TO THE BORROWER ON TERMS SETTLED. IT IS ALSO TO BE NOTICED THAT A TAXING STATUTE HAS TO BE STRICTLY CONSTRUED AND THE SUBJECT CANNOT BE TAXED UNLESS COMES WITHI N THE LETTER OF LAW. THE ARGUMENT THAT A PARTICULAR INCOME FALLS WITHIN THE SPIRIT OF THE LAW CANNOT BE AVAILED OF BY THE REVENUE. IT IS TRITE LAW THAT NO TAX CAN BE IMPOSED ON ITA NO. 4517 / 13 19 THE SUBJECT WITHOUT THE WORDS IN THE ACT. NO TAX CAN BE IMPOSED BY INFERENCE OR ANALOGY. THE CARDINAL PRINCIPLE OF INTERPRETATION OF FISCAL LAW IS THAT IT SHOULD BE CONSIDERED STRICTLY. IN VIEW OF THE ABOVE, THE INTEREST IN ICDS UNLESS THEY CLEARLY FALL WITHIN THE MEANING OF INTEREST ON LOANS AND ADVANCES WOULD NOT BE TAXABLE. ICD CA N NEITHER BE A LOAN NOT AN ADVANCE. THEREFORE, THE AO IS DIRECTED TO EXCLUDE THE INTEREST ON ICD FROM THE ASSESSMENT OF THE ASSESSEE. CONSEQUENTLY, THE LEVY OF PENALTY MADE WOULD ALSO NOT STAND. THEY ARE, ACCORDINGLY DELETED. 71. IT HAS CONSIDERED THE D ECISION OF BAJAJ AUTO HOLDINGS LTD.S CASE (SUPRA) REFERRED TO BY THE CIT(A) AND DISTINGUISHED BY STATING THAT MUMBAI BENCH HAS PROCEEDED ON A FOOTING THAT DEPOSIT WOULD BE AN ADVANCE. AND WOULD BE INCLUDIBLE N THE TERM WITH INTEREST ON DEPOSIT AND ADVANCE . THE BOMBAY BENCH IS MORE PERSUADED BY THE REASON THAT THE INTEREST ON DEPOSIT WAS NOT EXCLUDED FROM THE DEFINITION OF INTEREST AND THE TERM INTEREST ON LOANS AND ADVANCES WAS WIDE ENOUGH TO INCLUDE THE SAME. IT HAD NOT CONSIDERED THAT WHETHER IT WAS NOT A LOAN NOR AN ADVANCE AND AS TO WHETHER THE AMENDED DEFINITION OF INTEREST UNDER THE ACT WAS EXHAUSTIVE OR INCLUSIVE. IN HOLDING THAT THE ICD IS NOT AN ADVANCE THE AHMEDABAD TRIBUNAL ALSO NOTICED THAT THE MEANING OF THE TERM ADVANCE AS UNDERSTOOD IN THE CO MMERCIAL WORDS AND AS STATED UNDER THE TITLE WHAT IS ADVANCE IN THE FOLLOWING WORDS : IT WAS HELD IN KM. MOHAMMED ABDUL KADIR ROWTHER VS. S. MUTHIA CHETTIAR (1960) 2 MAD. LJ 13 AT 15 THAT ADVANCE MEANS LITERALLY A PAYMENT BEFOREHAND; IN CERTAIN CASES IT MAY BE A LOAN BUT IT CANNOT BE SAID THAT A SUM PAID BY WAY OF ADVANCE IS NECESSARILY A LOAN. IN RAJA OF VENKATAGIRI VS. KRISHNAYYA RAO BAHADUR AIR 1948 PC 150 AT P. 155, IT WAS OBSERVED THAT ORDINARILY AND ADVANCE DOES NOT CONNOTE ANY IDEA OF REPAYMENT. I T IS, THEREFORE, CLEAR THAT THE WORD ADVANCED USED IN S. 296 MEANS AN ADVANCE IN THE NATURE OF A LOAN AND NOT MERELY AN ADVANCE AS IS UNDERSTOOD IN THE COMMON PARLANCE IN THE SENSE OF PAYMENT OF MONEY BEFOREHAND AND WHICH IS LIKELY TO BECOME DUE AT SOME FU TURE TIME. 72. IT HAS ALSO REFERRED TO S. 296 OF COMPANIES ACT REGULATING LOANS TO DIRECTORS FOR BOOK DEBT WHICH WAS IN THE NATURE OF LOANS OR ADVANCES FROM ITS INCEPTION. 73. IN THE CASE OF HOUSING & URBAN DEVELOPMENT CORPORATION LTD. (SUPRA), THE SP ECIAL BENCH AFTER CONSIDERING VARIOUS DECISIONS AND CIRCULARS OF CBDT HELD THAT DEPOSITS IN THE FORM OF SECURITIES AND BONDS CANNOT BE CONSIDERED AS LOANS AND ADVANCES AND AS SUCH INTEREST THEREON SHALL BE ITA NO. 4517 / 13 20 OUTSIDE THE SCOPE OF INTEREST DEFINED UNDER S. 2(7 ) OF THE INTERESTTAX ACT. PARA 22 OF THE ORDER READS AS UNDER: 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 THE DISTINCTION CAN BE SUMMED UP BY STATING THAT IN THE CASE OF LOAN, THE NEEDY PERSON APPROACHES THE LENDER FOR OBTAINING THE LOAN THEREFROM. 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 DEFINITION OF INTEREST AS GIVEN IN S. 2(7) OF THE ACT AND AS SUCH WOULD NOT BE LIABLE TO INTEREST TAX. THE ANSWER TO THE QUESTION UNDER REFERENCE IN OUR HUMBLE OPINION IS THAT INVESTMENTS MADE BY WAY OF SHORT - TERM DEPOSITS AND ALSO IN THE FORM OF SECURITIES AND BONDS CANNOT BE CONSIDERED AS LOANS AND ADV ANCES AND AS SUCH INTEREST THEREON SHALL BE OUTSIDE THE SCOPE OF INTEREST DEFINED UNDER S. 2(7) OF THE ACT. 74. IN THESE CIRCUMSTANCES WE HOLD THAT INTEREST ON ICDS IS NOT AN INTEREST ON LOAN OR ADVANCE THEREFORE WOULD NOT BE INCLUDIBLE IN THE CHARGEA BLE INTEREST UNDER THE INTERESTTAX ACT. FROM THE ABOVE IT IS CLEAR THERE IS DISTINCTION BETWEEN DEPOSITS VIS - A - VIS LOANS/ADVANCES. S. 2(22)(E) ENACTS A DEEMING FICTION WHEREBY THE SCOPE AND AMBIT OF THE WORD DIVIDEND HAS BEEN ENLARGED TO BRING WITHIN ITS SWEEP CERTAIN PAYMENTS MADE BY A COMPANY AS PER THE SITUATIONS ENUMERATED IN THE SECTION. SUCH A DEEMING FICTION WOULD NOT BE GIVEN A WIDER MEANING THAN WHAT IT PURPORTS TO DO. THE PROVISIONS WOULD NECESSARILY BE ACCORDED STRICT INTERPRETATION AND THE AMB IT OF THE FCTION WOULD NOT BE PRESSED BEYOND ITS TRUE LIMITS. THE REQUISITE CONDITION FOR INVOKING S. 2(22)(E) OF THE ACT IS THAT PAYMENT MUST BE BY WAY OF LOAN OR ADVANCES. SINCE THERE IS A CLEAR DISTINCTION BETWEEN THE ICDS VIS - A - VIS LOANS/ADVANCES, ACC ORDING TO US THE AUTHORITIES BELOW WERE NOT RIGHT IN TREATING THE SAME AS DEEMED DIVIDEND UNDER S. 2(22)(E) OF THE ACT. SINCE WE HOLD THAT ICDS DO NOT COME WITHIN THE PURVIEW OF DEEMED DIVIDEND UNDER S. 2(22)(E) OF THE ACT, THE ALTERNATIVE CONTENTION OF TH E ASSESSEE NAMELY BY VIRTUE OF S. 2(22)(E)(II) OF THE ACT, THE UNSECURED LOANS RECEIVED BY THE ASSESSEE IS NOT DIVIDEND IS NOT ADJUDICATED. WE ARE OF THE VIEW THAT THE INTERCORPORATE DEPOSITS CANNOT BE TREATED AS A LOAN FALLING WITHIN THE PURVIEW OF SEC TION 2(22)(E) OF THE ACT. ITA NO. 4517 / 13 21 6. ADMITTEDLY, THE LD. CIT(A) HAS ALSO ACCEPTED THE FACT THAT WHAT THE ASSESSEE HAS RECEIVED IS INTERCORPORATE DEPOSITS, THIS FACT REMAINS UNCHALLENGED. THE LD. CIT(A) HAS, AFTER ACCEPTING THAT THIS IS INTERCORPORATE DEPOSIT PRO CEEDED TO HOLD THAT THE TERM INTERCORPORATE DEPOSIT WAS SYNONYMOUS OF LOAN. AT THIS POINT, THE LD. CIT(A) FELL INTO ERROR AS AN INTERCORPORATE DEPOSIT IS NOT A LOAN BUT A DEPOSIT WHICH HAS A MEANING DIFFERENT FROM THE TERM LOAN. THE DECISIONS AS RELIED ON BY THE LD. CIT(A) AS ALSO BY THE LD. CIT(DR), ADMITTEDLY, ARE ON LOANS. NONE OF THE DECISIONS REFERRED TO BY THE LD. CIT(A) OR THE LD. CIT(DR) DISCUSSES ANYWHERE THAT DEPOSITS ARE TO BE TREATED AS LOANS. CONSEQUENTLY, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF BOMBAY OIL INDUSTRIES LTD. REFERRED TO SUPRA, THE ADDITION REPRESENTING INTERCORPORATE DEPOSITS TREATED AS LOAN BY THE AO AND AS CONFIRMED BY THE LD. CIT(A) STANDS DELETED. 10. LD. AR FURTHER CONTEN TED THAT MODE OF TAKING OR ACCEPTING CERTAIN LOANS AND DEPOSITS AS GIVEN U/S.269SS & 269T, CLEARLY DEFINES LOANS AND ADVANCES AS DISTINCT FROM THE INTER CORPORATE DEPOSIT. 11. WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE A UTHORITIES BELOW AND FOUND THAT THE AMOUNT WAS RECEIVED BY THE ASSESSEE WAS INTERCORPORATE DEPOSIT. THE RELEVANT BOARD RESOLUTION WAS ALSO FILED BEFORE THE AO STATED THAT THE SAID ADVANCE WAS IN THE NATURE OF ICD AND THE AO HAS NOT BROUGHT ANYTHING ON RECO RD TO REPUDIATE THE CLAIM MADE. THE CIT(A) HAS ALSO EXAMINED THE BOARD RESOLUTION AND RECORDED DETAILED FINDING AT PARA 5.5.7 TO THE EFFECT THAT IT WAS IN THE NATURE OF ICD AND AFTER APPLYING THE PROPOSITION OF LAW LAID DOWN BY THE VARIOUS JUDICIAL PRONOUN CEMENTS TO THE FACTS OF THE INSTANT CASE, CAME TO THE CONCLUSION THAT IT WAS IN THE NATURE OF ICD, WHICH IS NOT COVERED BY MISCHIEF OF SECTION 2(22)(E) WHICH IS RELATING TO THE LOANS AND ADVANCES. THE COORDINATE BENCH IN THE CASE OF M/S IFB AGRO INDUSTRIE S LTD., ITA NO.1721/KOL/2012 HAS DEALT ELABORATELY WITH THE MEANING OF LOANS OR ADVANCES VIS - - VIS DEPOSIT AND HAD COME TO THE CONCLUSION THAT ITA NO. 4517 / 13 22 INTERCORPORATE DEPOSIT IS NOT COVERED BY THE MISCHIEF OF LOANS AND ADVANCES AS STIPULATED U/S.2(22)(E) OF THE ACT . THE DETAILED FINDING RECORDED BY CIT(A) FOR TREATING THE AMOUNT RECEIVED AS INTERCORPORATE DEPOSIT IS AS PER MATERIAL ON RECORD AND NOTHING WAS BROUGHT TO DISLODGE THE FINDING OF CIT(A). ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). 12 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 30/11 / 201 5 . SD/ - SD/ - ( SANDEEP GOSAIN ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 30/11 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//