DCIT, New Delhi V. M/s Sahara India Commercial Corpn. Ltd., Lucknow

ITA 5772/DEL/2010

• Counselvise Citation: 577220114 RSA 2010
• Duration Of Justice: 2 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 17-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 16-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: REENA S PURI
• Keywords: Reasonable cause
• Section: 273B; 56(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : H : NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO.5772/DEL/2010 ASSESSMENT YEAR : 2005-06 DCIT, CENTRAL CIRCLE-6, NEW DELHI. VS. SAHARA INDIA COMMERCIAL CORPN. LTD., 1, KAPOORTHALA COMPLEX, ALIGANJ, LUCKNOW. PAN : AADCS6118F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AJAY VOHRA, ADVOCATE REVENUE BY : SMT. REENA S. PURI, CIT, DR ORDER PER A.D. JAIN, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE DEPARTMENT FOR ASSESSMENT YEAR 2005-06 AGAINST THE ORDER DATED 30.09.2010 PASSED BY T HE CIT (A)-I, NEW DELHI. THE ONLY EFFECTIVE GROUND TAKEN BY THE DEPARTMENT IS THAT THE LD. CIT (A) HAS ERRED IN DELETING THE PENALTY OF ` 35,56,79,900/- IMPOSED U/S 271-D OF THE IT ACT. 2. THE ISSUES IN THIS CASE ARE TWO: AS TO WHETHER THE OFC DS OF THE ASSESSEE COMPANY ARE LOANS ATTRACTING THE PROVISIONS OF SE CTION 269- SS AND, CONSEQUENTLY, THOSE OF SECTION 271-D OF THE A CT AND AS TO WHETHER THE ASSESSEE WAS PREVENTED BY REASONABLE CAUSE WI THIN THE MEANING OF SECTION 273B OF THE ACT FOR NOT COMPLYIN G WITH THE STATUTORY PROVISIONS OF SECTION 269-SS, THEREBY ATTRA CTING THE PENALTY LEVIED U/S 271-D OF THE ACT. ITA NO.5772/DEL/2010 2 3. WE FIRST TAKE UP THE CONTROVERSY AS TO WHETHER OR NOT THE DEBENTURES ARE LOANS COVERED U/S 269-SS OF THE ACT. 4. THE FACTS, AS PER THE RELEVANT DOCUMENTS AVAILABLE ON RECORD ARE THAT THE ASSESSEE, I.E., M/S SAHARA INDIA COMMERCIAL CO RPORATION LTD. FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06 O N 31.10.2008 DECLARING LOSS OF ` 164,76,44,352/-. THE ASSESSMENT WAS COMPLETED U/S 143 (3) AT A LOSS OF ` 138,58,88,630/- ON 18.07.2008. THE ASSESSMENT WAS COMPLETED AFTER CARRYING OUT SPECIAL AUDI T U/S 142 (2A). THE ASSESSING OFFICER, AFTER EXAMINATION OF THE RETURN OF INCOME AND THE SPECIAL AUDIT REPORT, HAS GIVEN A FINDING TH AT THE ASSESSEE COMPANY ACCEPTED DEPOSITS IN CONTRAVENTION OF SECTION 269SS DURING THE F.Y. 2004-05 RELEVANT TO THE A.Y. UNDER CONSIDER ATION. IT WAS NOTICED BY THE ASSESSING OFFICER THAT DEPOSITS UNDER THE NOMENCLATURE OPTIONALLY FULLY CONVERTIBLE DEBENTURES (OFCDS) WER E ARRANGED ON A SIGNIFICANT SCALE FOR THE ASSESSEE COMPANY BY M/S SAHARA I NDIA, A FIRM. 5. DURING THE FINANCIAL YEAR 2004-05, THE ASSESSEE COMP ANY HAS SHOWN ` 5171.40 CRORES UNDER THE HEAD AS OPTIONALLY FULLY CO NVERTIBLE DEBENTURES (OFCDS). THE SAME IS SHOWN AS UNSECURED LOA NS IN THE BALANCE SHEET (SCHEDULE-3 OF BALANCE SHEET). FROM THE TAX AUDIT REPORT FILED ALONG WITH THE RETURN, THE ASSESSING OFFIC ER OBSERVED FROM ANNEXURE-XIII (WHICH IS REGARDING APPLICABILITY OF S ECTION 269SS OF INCOME TAX ACT, 1961), THAT THE AUDITORS OF THE ASSESSEE CONSIDERED THE AMOUNT UNDER OFCD AS SECURITIES AND NOT AS LOANS/D EPOSITS AND HAVE GIVEN THE FOLLOWING NOTE:- THE COMPANY HAS ALSO RECEIVED SUBSCRIPTION THROUGH P RIVATE PLACEMENT IN RESPECT OF OPTIONALLY FULLY CONVERTIBLE DE BENTURES. AS PER THE EXPERT OPINION OF THE SOLICITOR AND ADVOCATE OBTAINED BY THE COMPANY, SUBSCRIPTION RECEIVED ON ISSUE OF OF CD WHICH IS IN THE NATURE OF SECURITIES AND NOT IN THE NATURE OF LOAN OR DEPOSIT WITHIN THE MEANING OF SECTION 269SS OF THE INCOM E TAX ITA NO.5772/DEL/2010 3 ACT. RELYING ON THE SAME THE SUBSCRIPTION RECEIVED UND ER OFCD HAS NOT BEEN CONSIDERED TO BE FALLING WITHIN THE PURVIE W OF SECTION 269SS OF THE INCOME TAX ACT ALTHOUGH IN THE TAX AUDIT REPORT ISSUED BY US FOR FINANCIAL YEAR 2002-03 THE SA ME WERE CONSIDERED BY US FOR THE PURPOSE OF SECTION 269SS OF THE INCOME TAX ACT IN ABSENCE OF LEGAL OPINION TO THIS EFFECT. 6. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE COMPANY W AS REQUESTED BY THE ASSESSING OFFICER TO PROVIDE DETAILS OF OFCDS. FROM THE DETAILS SUBMITTED BY THE ASSESSEE, IT WAS OBSERVED BY THE ASSESSING OFFICER THAT MONEY WAS RECEIVED IN VIOLATION O F PROVISIONS OF SECTION 269SS OF THE INCOME TAX ACT. THE ASSESSING OFF ICER ALSO FOUND THAT THE COMMENTS OF THE AUDITOR DID NOT CLEARLY SHO W THAT ENTIRE DETAILS OF OFCD WERE EXAMINED BY HIM. THE AUDITOR I N THIS REGARD MERELY STATED THAT SUBSCRIPTIONS RECEIVED AND REPAYMENT S MADE IN RESPECT OF OFCDS WERE NOT CONSIDERED TO BE FALLING WIT HIN THE PURVIEW OF SECTIONS 269SS AND 269T OF THE IT ACT, 1961. THE BASIS FOR ARRIVING AT THIS CONCLUSION WAS SOME LEGAL OPINION OF THE SOLICIT OR AND ADVOCATE, TREATING OFCDS AS SECURITIES. IT WAS, HOWEVER, NOTI CED BY THE ASSESSING OFFICER THAT THE SAME AUDITORS CONSIDERED OFCDS AS LOANS/DEPOSITS FOR F.Y. 2002-03. FURTHER, THE ASSESSEE HA S ON ITS OWN CLASSIFIED THE OFCDS AS UNSECURED LOANS IN ITS BALANCE SHEE T IN THIS YEAR, AS IN THE EARLIER YEAR. THE ASSESSING OFFICER FURT HER OBSERVED THAT ALTHOUGH THE OFCDS WERE CONVERTIBLE AT THE OPTION OF THE DEPOSITORS, NO SUCH DETAILS OF CONVERSION WERE AVAILABLE FROM THE TAX AUDIT REPORT. IN VIEW OF ABOVE FACTS, THE ASSESSING OFFICER HELD THAT THE AMOUNT RECEIVED AND PAID UNDER OFCDS WERE LOANS/DEPOSITS AND FELL WITHIN THE PURVIEW OF SECTION 269SS OF THE ACT. FOR THE REASON S DISCUSSED ABOVE, THE AMOUNT OF DEPOSITS ACCEPTED, WHICH COMES TO ` 35,56,79,900/- AND AMOUNTS REDEEMED, WHICH COMES TO ` 28,35,52,822/- WERE TREATED BY THE ASSESSING OFFICER TO BE IN THE NATURE OF LOANS AND DEPOSITS COVERED UNDER SECTIONS 269SS AND 269T OF INCOME TAX ACT, 1961. ITA NO.5772/DEL/2010 4 7. IN THE PENALTY PROCEEDINGS, A SHOW CAUSE NOTICE DAT ED 13.03.2009 FOR LEVY OF PENALTY U/S 271D OF THE ACT W AS ISSUED. IN RESPONSE, THE ASSESSEE FILED WRITTEN SUBMISSIONS DATED 06.04. 2009 AND 19.06.2009, WHEREIN, INTER ALIA, THE ASSESSEE MADE THE FOLLOWING SUBMISSIONS, AS SUMMARIZED BY THE ASSESSING OFFICER AT PAGE 23 OF THE PENALTY ORDER, TO CONTEND THAT THE OFCDS ARE NOT LOA NS OR DEPOSITS, AS CONTEMPLATED U/S 269SS OF THE IT ACT AND SO, NO PENA LTY U/S 271D OF THE ACT CAN BE LEVIED:- I. THE ASSESSING OFFICER DIRECTED THE SPECIAL AUDITOR TO R EPORT ALL PARTICULARS REGARDING ALL THE DEPOSITS INCLUDING OFCDS OF ` 20,000/- OR ABOVE ACCEPTED BY THE COMPANY. THUS, TH E SPECIAL AUDITOR WAS DIRECTED TO GIVE COMMENTS ON OFCD S AND NOT IN RESPECT OF LOANS OR DEPOSIT AS CONTEMPLATED U/S 269SS OF IT ACT. THEREFORE, THE VERY BASIS OF THE NOTICE U /S 271D IS ILL FOUNDED AND NOT TENABLE IN LAW. II. THE SPECIAL AUDITOR IN THEIR REPORT HAVE MADE OBSERV ATIONS ON THE DIFFERENCES BETWEEN LOAN AND DEPOSIT AND SUBSCRI PTION RECEIVE UNDER OFCDS WHICH IS IN THE NATURE OF SECURIT Y. III. THE IT ACT RECOGNIZES THE DIFFERENCE BETWEEN THE TER MS LOAN & DEPOSIT AND SECURITY WHICH IS EVIDENT FROM THE FA CT THAT THE TDS PROVISIONS FOR SECURITIES IS IN SECTION 193 WHE REAS THOSE FOR OTHER THAN SECURITIES IS IN 194A (2). IV. SIMILAR DISTINCTIONS ARE CLEAR U/S 56(2) OF THE IT ACT , 1961 AND ALSO SECTION 2(28B) OF THE IT ACT, 1961 WHICH DEFINES THE INTEREST ON SECURITIES TO MEAN:- A. INTEREST ON ANY SECURITY OF THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT; B. INTEREST ON DEBENTURES OR OTHER SECURITIES FOR MONEY ISSU ED BY OR ON BEHALF OF A LOCAL AUTHORITY OR A COMPANY O R A CORPORATION ESTABLISHED BY A CENTRAL STATE OR PROVIN CIAL ACT. ITA NO.5772/DEL/2010 5 V. THUS, UNDER THE INCOME TAX ACT, INTEREST ON DEBENTURE S HAS TO BE TREATED AS INTEREST ON SECURITIES MEANING THEREBY TH AT THE DEBENTURES ARE RECOGNIZED AS SECURITIES AND NOT AS LOANS & DEPOSITS. VI. THE SUBSCRIPTION RECEIVED TOWARDS ALLOTMENT OF OFCDS IS NOT IN THE NATURE OF ACCEPTANCE OF MONEY AS LOAN OR DEP OSIT. THE OPINION OF M/S JHUNJHUNWALA & CO. SOLICITORS AND ADVOCATES SUPPORTS THE ABOVE CONTENTION. VII. JUST BECAUSE THE SUBSCRIPTION RECEIVED UNDER OFCDS IS SHOW N IN THE BALANCE SHEET UNDER THE HEAD LOAN & ADVANCES , IT CANNOT BE TAKEN AS LOAN & DEPOSIT. 8. THE ASSESSING OFFICER, HOWEVER, REJECTED THE ASSESSEES CONTENTION BY OBSERVING AS FOLLOWS:- 2.8.1 THE FIRST ISSUE THAT NEEDS TO BE DECIDED IS WHETH ER THE SUBSCRIPTIONS RECEIVED UNDER THE OFCDS FALL IN THE PUR VIEW OF SECTION 269SS OF THE 1. T. ACT. SEC. 269SS STATES AS UNDER:- 'NO PERSON SHALL, AFTER THE 30 TH DAY OF JUNE, 1984, TAKE OR ACCEPT FROM ANY OTHER PERSON(HEREAFTER IN THIS SECTION REFERRED TO AS THE DEPOSITOR), ANY LOAN OR DEPOSIT OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT IF, A) THE AMOUNT OF SUCH LOAN OR DEPOSIT OR THE AGGREGATE AMOUNT OF SUCH LOAN AND DEPOSIT; OR B) ON THE DATE OF TAKING OR ACCEPTING SUCH LOAN OR DEPO SIT, ANY LOAN OR DEPOSIT TAKEN OR ACCEPTED EARLIER BY SUC H PERSON FROM THE DEPOSITOR IS REMAINING UNPAID (WHETHER REPAYMENT HAS FALLEN DUE OR NOT), THE AMOUNT OR THE AGGREGATE AMOUNT REMAINING UNPAID' OR C) THE AMOUNT OR THE AGGREGATE AMOUNT REFERRED TO IN CLAUSE (A) TOGETHER WITH THE AMOUNT OR THE AGGREGATE AMOUNT REFERRED TO IN CLAUSE (B) IS TWENTY THOUSAND RUPE ES OR MORE: ITA NO.5772/DEL/2010 6 PROVIDED THAT THE PROVISIONS OF THIS SECTION SHALL NOT A PPLY TO ANY LOAN OR DEPOSIT TAKEN OR ACCEPTED FROM, OR ANY LO AN OR DEPOSIT TAKEN OR ACCEPTED BY,- (A) GOVERNMENT; (B) ANY BANKING COMPANY, POST OFFICE SAVING BANK OR CO-OPERATIVE BANK; (C) ANY CORPORATION ESTABLISHED BY A CENTRAL, STATE OR PROVINCIAL ACT; (D) ANY GOVERNMENT COMPANY AS DEFINED IN SECTION 617 OF THE COMPANIES ACT, 1956 (1 OF 1956); (E) SUCH OTHER INSTITUTION, ASSOCIATION OR BODY OR CLASS OF INSTITUTIONS ASSOCIATIONS OR BODIES WHICH THE CENTRAL GOVERNMENT MAY, FOR REASONS TO BE RECORDED IN WRITING , NOTIFY IN THIS BEHALF IN THE OFFICIAL GAZETTE: [PROVIDED FURTHER THAT THE PROVISIONS OF THIS SECTION SHA LL NOT APPLY TO ANY LOAN OR DEPOSIT WHERE THE PERSON FROM WHO M THE LOAN OR DEPOSIT IS TAKEN OR ACCEPTED AND THE PERSON BY WHOM THE LOAN OR DEPOSITS TAKEN OR ACCEPTED ARE BOTH HAVING AGRICULTURE INCOME AND NEITHER OF THEM HAS ANY INCOME CHARGEABLE TO TAX UNDER THIS ACT.]' 2.8.2 THUS, THE SECTION IS APPLICABLE TO LOANS & DEPO SITS TAKEN BY THE ASSESSEE. THE QUESTION IS THEREFORE WHETHER OFCD S ARE LOANS OR DEPOSITS? THE ASSESSEE HAS QUOTED VARIOUS PR OVISIONS OF THE 1. T. ACT, 1961 AND THE COMPANIES ACT,1956 TO CLA IM THAT THE SUBSCRIPTION UNDER OFCDS ARE IN THE NATURE OF DEBENTURES WHICH ARE SECURITIES AND THEREFORE DO NOT F ALL IN THE CLASS OF LOANS OR DEPOSITS. 2.8.3 HOWEVER, IT IS NOT POSSIBLE TO ACCEPT THE CLAIM OF THE ASSESSEE THAT THE SUBSCRIPTIONS COLLECTED UNDER OFCDS SC HEME BEING DEBENTURES HAVE THE CHARACTER OF SECURITIES AND NOT 'LOANS AND DEPOSITS'. THE WORD 'SECURITY' AS PER CO MMON USAGE IN THE FINANCIAL WORLD REFERS TO INSTRUMENTS THRO UGH WHICH PUBLIC DEPOSITS ARE MOBILIZED EITHER BY THE STATE OR ENTITIES AUTHORIZED UNDER LAW SUCH AS BODY CORPORATES. THE MAJOR DISTINCTION THAT A SECURITY HAS VIS-A-VIS AN ORDIN ARY DEPOSIT IS THAT A SECURITY IS MARKETABLE AND TRANSFERABLE . THEREFORE, A SECURITY IS A DEPOSIT WITH CERTAIN ADDITIO NAL ATTRIBUTES. THEREFORE, THE USE OF THE WORD 'SECURITY' IN NO WAY DEPRIVES THE BASIC CHARACTER OF A 'DEPOSIT' IN ANY TRAN SACTION. FURTHER, THE DEBENTURES ARE SPECIALIZED INSTRUMENTS WHER E A DEBENTURE HOLDER HAS THE OPTION TO CONVERT HIS DEPOSIT IN TO EQUITY SHARES AT A FUTURE DATE. THUS, THE ESSENTIAL CHA RACTER OF A DEBENTURE IS THAT OF A DEPOSIT UNTIL THE DEBENTURE HOL DER EXERCISES HIS OPTION. IN ANY CASE, AT THE TIME OF ACCEP TANCE OF A DEBENTURE, THE ASSESSEE IS IN FACT, ACCEPTING A DEPOSIT AND THEREFORE, HAS TO COMPLY WITH THE PROVISIONS OF SECTION 269SS. ITA NO.5772/DEL/2010 7 2.8.4 THE ASSESSEE HAS REFERRED TO SECTION 2(12) OF THE COMPANIES ACT WHICH DEFINES DEBENTURE AS A STOCK, BO ND OR ANY OTHER SECURITY WHETHER CONSTITUTING A CHARGE ON THE A SSETS OF THE COMPANY OR NOT. FROM THIS DEFINITION, A CONCLUSI ON HAS BEEN DRAWN THAT DEBENTURE IS A SECURITY OF A COMPANY. T HE ASSESSEE HAS FURTHER RELIED ON THE COMPANIES (ACCEPTAN CE OF DEPOSITS) RULES, 1975 WHEREIN CLAUSE 2(B) DEFINES DE POSITS AND EXCLUDES FROM ITS PURVIEW DEBENTURES WHICH ARE SECURE D BY MORTGAGE OF ANY IMMOVABLE PROPERTY OF THE COMPANY OR W ITH AN OPTION TO CONVERT THEM INTO SHARES IN THE COMPANY. TH E ASSESSEE HAS CLAIMED ON THE BASIS OF THE DEFINITION C ONTAINED IN THESE RULES THAT THE DEBENTURES ISSUED BY A COMPANY WHIC H ARE CONVERTIBLE INTO SHARES ARE NOT DEPOSITS WITHIN THE MEANING OF THESE RULES. SIMILARLY, SECTION 2(B) THE SECURITIES ACT HAS BEEN REFERRED WHEREIN THE DEFINITION OF SECURITIES IN CLUDES DEBENTURES BUT NOT DEPOSITS. 2.8.5 THE VARIOUS ENACTMENTS RELIED ON BY THE ASSESSEE HAVE GIVEN CERTAIN DEFINITIONS TO SECURITIES, DEBENTURES AND DEPOSITS WHICH ARE SPECIFIC TO THOSE ACTS AND GIVEN WITHIN THE C ONTEXT OF THE OBJECTS OF SUCH ENACTMENTS. SUCH DEFINITIONS CAN NO T BE IMPORTED INTO THE FISCAL DOMAIN TO RESTRICT THE SWEEP O F TAXATION STATUTES. THUS WHEN THE COMPANIES ACT STATES THAT DEBENTURES CONVERTIBLE INTO EQUITY ARE NOT DEPOSITS, THE OBJECTIVE IS TO DIFFERENTIATE BETWEEN TWO DIFFERENT INSTRUM ENTS OF FUND MOBILIZATION WITH DIFFERENT CHARACTERISTICS SUC H AS THE RISK THEY CARRY TO THE COMPANY, TO THE DEPOSITOR AS ALSO OTHER LEGAL OBLIGATIONS. THE FACT THAT THE DEFINITION OF SECURI TY IN THE SECURITIES ACT DOES NOT INCLUDE DEPOSITS ALSO DOES NOT H ELP THE ASSESSEE'S CASE. 2.8.6 THE ASSESSEE HAS CLAIMED THAT OFCDS ISSUED BY TH E COMPANY ARE DEBENTURES CONVERTIBLE INTO EQUITY AT THE O PTION OF THE DEBENTURE HOLDER AS BORNE OUT BY THE RED HERRING PROSPECTUS. BUT THE FACT REMAINS THAT THESE DEBENTURES WERE IN THE NATURE OF A DEPOSIT AT THE TIME OF THE SUBSCRIPTION. THEY WOULD RETAIN THEIR CHARACTER AS A DEPOSIT UNTIL THE OPTIO N IS EXERCISED BY THE DEPOSITOR TO CONVERT THE SAME INTO EQUITY SHARES. IN CASE OF REDEMPTION, THE DEBENTURE HOLDER G ETS BACK HIS PRINCIPAL WITH INTEREST. IN CASE OF CONVERSION IN TO EQUITY SHARE, THE DEBENTURE HOLDER GETS THE INTEREST UP TO THE DA TE OF SUCH CONVERSION. THEREFORE, THE ESSENTIAL CHARACTER O F THE DEBENTURE IS THAT OF A DEPOSIT. A REFERENCE TO THE RED HE RRINGS PROSPECTUS ISSUED BY THE COMPANY SHOWS THAT THE DEPOSITOR IS ALLOWED TO EXERCISE THE OPTION OF EQUITY CONVERSION ON LY AFTER COMPLETION OF 91 ST MONTH AND BEFORE THE 92 ND MONTH. CONSIDERING THE LONG TIME PERIOD THE DEPOSITOR KEEPS HI S MONEY WITH THE COMPANY BEFORE HE IS ALLOWED THE OPTION OF EQUITY CONVERSION, THE OFCDS IN THE INSTANT CASE, APPEAR MORE TO BE IN THE NATURE OF DEPOSITS RATHER THAN DEBENTURES. ITA NO.5772/DEL/2010 8 2.8.7 THE ASSESSEE HAS FURTHER CLAIMED THAT SINCE SECU RITIES AND DEBENTURES ARE LISTED TOGETHER IN SECTION 2(28B) OF THE INCOME TAX ACT 1961 WHICH DEFINES 'INTEREST ON SECURI TIES' GOES TO PROVE THAT DEBENTURES ARE NOT DEPOSITS. FURTHER, TH E ACT SPECIFIES THE HEAD UNDER WHICH SUCH INCOME BY WAY OF INTEREST ON SECURITIES WOULD BE TAXABLE BUT NO SUCH D EFINITION IS GIVEN FOR INTEREST ON LOANS AND ADVANCES WHICH GOES TO SHOW THAT SECURITIES ARE DIFFERENT FROM LOANS AND DEPOSITS. T HE ASSESSEE HAS ALSO POINTED OUT THAT THE TDS PROVISIONS FO R INTEREST ON SECURITIES IS SECTION 193 AND FOR ALL OTHE R INTEREST IS SECTION 194 A(2) CLEARLY SHOWING THAT THE SECURITIES A RE NOT DEPOSITS. THE ASSESSEE HAS PUT FORTH ALL THESE ARGUMENTS TO PROVE THAT DEBENTURES ARE SECURITIES AND NOT DEPOSITS. T HE ARGUMENTS OF THE ASSESSEE ARE ONLY HALF-TRUTHS AS ALL TH AT THE ACT HAS DONE IS TO CARVE OUT A SEPARATE PROVISION FOR S ECURITIES AS A CLASS. THE FACT REMAINS THAT THE TERM 'DEPOSITS' HAS A VERY WIDE AMPLITUDE IN ITS MEANING AND DEBENTURES, SECURITI ES ETC. ARE SUBSETS WITHIN IT. ALL THAT THE ACT HAS DONE IS TO STIPU LATE CERTAIN SPECIFIC PROVISIONS FOR THESE SUBSETS AND THAT B Y NO MEANS, RENDERS DEBENTURES AS A CLASS APART FROM THE DE POSITS. DEBENTURES ARE INHERENTLY DEPOSITS AND HAVE TO BE REGAR DED AS SUCH. 2.8.8 I HAVE ALSO GONE THROUGH THE OBSERVATIONS OF THE SPECIAL AUDITOR ON THIS ISSUE AND THE ELABORATE REASONING GIVEN BY THE SOLICITORS & ADVOCATES M/S. JHUNJHUNWALA & CO TO CONC LUDE THAT DEBENTURES ARE NOT DEPOSITS AND HENCE SECTION 269 SS WO ULD NOT BE APPLICABLE. THEY HAVE CONCLUDED THAT DEBENTURES ARE SECURITIES AND HENCE NOT DEPOSITS BASED ON THE COMPANI ES ACT AND THE SECURITIES ACT. BUT AS DISCUSSED ABOVE, THESE A RE SPECIOUS ARGUMENTS AS SUCH RESTRICTIVE INTERPRETATIONS G IVEN IN DIFFERENT STATUTES HAVE A SPECIFIC PURPOSE IN THE CONTEX T OF THOSE STATUTES AND THEY CAN NOT BE IMPORTED IN TO THE INC OME TAX ACT 1961. SUCH AN EXERCISE WOULD HAVE THE EFFECT OF READING INTO THE TAXING STATUTE A RESTRICTIVE MEANING WHICH IS NOT INTENDED BY THE LEGISLATURE IN THE FIRST PLACE. 2.8.9 THEREFORE, I WOULD WITHOUT ANY HESITATION REJECT THE CONTENTION OF THE ASSESSEE THAT THE SUBSCRIPTIONS COLLEC TED UNDER THE OFCD SCHEME ARE NOT DEPOSITS. I HOLD THAT THE TRANSACTIONS IN WHICH THE ASSESSEE COLLECTED THE AMOUNTS AS OFCDS COME WITHIN THE AMBIT OF SECTION 269SS AND SINCE THE LEGAL PROVISIONS HAVE BEEN CONTRAVENED, THE PENALTY PROCEEDINGS U/S 271D ARE CLEARLY APPLICABLE IN THE F ACTS OF THE CASE. 9. HOLDING THAT THE ASSESSEE COMPANY HAD VIOLATED THE PROVISIONS OF SECTION 269SS OF THE ACT, THE ASSESSING OFFICER IMPO SED A PENALTY OF ` 35,56,79,900/- ON THE ASSESSEE. ITA NO.5772/DEL/2010 9 10. WHILE DELETING THE PENALTY ON THIS ISSUE, THE LD. CIT (A), BY VIRTUE OF THE IMPUGNED ORDER, OBSERVED AS FOLLOWS:- I HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF THE APP ELLANT. THE WORD LOAN OR DEPOSIT IS NOWHERE DEFINED UNDER THE INCOME TAX ACT. THE DEFINITION OF THE WORD LOAN AS GIVEN IN TH E BLACKS LAW DICTIONARY IS - 'LENDING'. DELIVERY BY ONE PARTY TO AND RECEIPT BY ANOTHER PARTY SUM OF MONEY UPON AGREEMENT, EXPRESS OR IMPLIED TO REPAY IT WITH OR WITHOUT INTEREST. THE ABOVE DEFINITION OF THE LOAN DOES NOT COVER THE MON EY RECEIVED FOR SUBSCRIPTION OF DEBENTURE. SIMILARLY THE WORD 'DEPOSIT' HAS BEEN DEFINED 'THE COMMIT TO CUSTODY, OR TO LAY DOWN, TO PLACE, TO PUT, TO LET FALL (AS SEDIMENT). THE LO DGE FOR SAFE-KEEPING OR AS A PLEDGE TO ENTRUST TO THE CARE OF AN OTHER. IT ALSO INCLUDES MONEY PLACED WITH A PERSON AS AN EARNE ST OR SECURITY FOR THE PERFORMANCE OF SOME CONTRACT. THUS, TH E WORD 'DEPOSIT' ALSO DOES NOT HAVE A SEMBLANCE TO THE SUBSCRI PTION RECEIVED FOR ISSUE OF DEBENTURES. THE WORD 'DEBENTURE ' HAS BEEN DEFINED AS A LONG TERM UNSECURED DEBT INSTRUMENT, ISSU ED PURSUANCE TO AN INDENTURE. THUS, ON READING OF THE ABOVE DEFINITION, IT IS CLEAR THAT ALL THE THREE DIFFERENT WORDS HAVE SEPARATE MEANINGS. SIMIL ARLY THE DEFINITION OF DEBENTURE UNDER THE COMPANIES ACT AND THA T OF A LOAN OR DEPOSIT ARE DIFFERENT. THE COMPANIES DEPOSIT RULES PROVIDE IN CLAUSE 2(B) THAT DEPOSIT MEANS ANY DEPOSIT OF MONEY AND INCLUDES ANY MONEY BORROWED BY A COMPANY BUT DOE S NOT INCLUDE MONEY RECEIVED BY COMPANY IN CERTAIN CASES. CLAUSE X OF THE EXCEPTION CONTAINED IN RULE 2(B) RULES OF THE DE POSIT EXCLUDES ANY AMOUNT RAISED BY ISSUE OF BONDS OR DEBE NTURES SECURED TO MORTGAGE BY ANY IMMOVABLE PROPERTY OF THE COMPANY OR WITH AN OPTION TO CONVERT THEM INTO SHARES IN THE COMPANY MEANING THEREBY THAT THE MONIES RAISED ON ISSUE OF 'BONDS' OR 'DEBENTURES' ARE NOT IN THE NATURE OF RECEIP T OF A DEPOSIT. SECTION 2(B) OF THE SECURITIES ACT DEFINES THE WORD SECURITY' AND THE WORD LOAN' OR DEPOSIT ARE NOT INC LUDED IN THE DEFINITION OF A SECURITY. SIMILARLY UNDER THE INCOME TAX ACT, SECTION 2(28B) OF THE INCOME TAX ACT DEFINES 'INTEREST ON SECURITIES' TO MEAN- (II) INTEREST ON ANY SECURITY OF THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT; (III) INTEREST ON DEBENTURES OR OTHER SECURITIES FOR MONEY ISSUED BY OR ON BEHALF OF A LOCAL AUTHORITY OR A COMP ANY ITA NO.5772/DEL/2010 10 OR A CORPORATION ESTABLISHED BY A CENTRAL STATE OR PROVINCIAL ACT, BUT DOES NOT INCLUDE INTEREST ON LOAN O R DEPOSIT. THUS, THE INTENT OF THE LEGISLATURE IS ABSOLUTELY CL EAR THAT INTEREST ON SECURITY IS DIFFERENT FROM INTEREST ON LOAN OR DEPOSIT. IN THE SAME PARLANCE THE SECURITIES ARE DIFFERENT FROM 'LOANS' AND 'DEPOSITS' AND DEBENTURES IS IN THE NATURE OF A 'SE CURITY' AND IS NOT IN THE NATURE OF ANY LOAN OR DEPOSIT AS ENVI SAGED BY THE PROVISIONS OF SECTION 269SS OF THE INCOME TAX ACT. THIS DIFFERENCE IS FURTHER STRENGTHENED FROM THE FACT THAT TDS PROVISIONS ARE ALSO SEPARATE FOR INTEREST ON SECURITIE S (SECTION 193) AND OTHER THAN INTEREST ON SECURITIES (SECTION 194A) . DIFFERENT TREATMENT AND DIFFERENT RATES HAVE BEEN PRESC RIBED IN BOTH THESE SECTIONS FOR DEDUCTION OF TAX AT SOURCE ON THE INTEREST. IT IS ALSO WELL SETTLED LAW THAT INTERPRETATION OF TAXING STATUES- SAME EXPRESSION IN DIFFERENT ENACTMENTS MUST BE GIVEN SAME MEANING. C.IT. VS. BHASKAR METTER 202 ITR 612 (COL.) SHANKAR CONST. CO. VS. CIT 189 ITR 463 (KAR) IN VIEW OF THE AFORESAID I AM OF THE OPINION THAT DEBEN TURE ISSUED BY A COMPANY IS A 'SECURITY' AND NOT A 'LOAN' OR 'DEPOSIT' AND, THEREFORE, THE SUBSCRIPTION RECEIVED FOR ISSUE OF DEBENTURE CANNOT BE EQUATED WITH RECEIPT OF 'LOAN' OR 'D EPOSIT' WITHIN THE MEANING OF SECTION 269SS OF THE INCOME TAX ACT. THIS VIEW IS ALSO SUPPORTED BY THE DECISION OF THE HON'BLE SUPREME COURT CITED HEREIN ABOVE WHEREIN THE HON'BLE SUPREME COURT HAS HELD THAT THE INTEREST ON INVESTMENTS (SECURITIES AND BONDS AND DEBENTURES) WAS NOT IN THE NATURE OF INTEREST ON 'LO AN' OR 'ADVANCE' TO WHICH THE PROVISIONS OF INTEREST TAX ACT W HERE APPLICABLE. THEREFORE, THE MONIES WHICH ARE RECEIVED BY THE APPELLANT COMPANY BY WAY OF SUBSCRIPTION MONEY FOR AL LOTMENT OF DEBENTURE CANNOT BE EQUATED WITH RESPECT OF ANY DEPOS IT WITHIN THE MEANING OF SECTION 269SS OF THE INCOME TAX ACT AND THE PROVISIONS OF SECTION 269SS WILL NOT BE ATTRACTED TO THE SUBSCRIPTION RECEIVED FOR ISSUE OF DEBENTURE AND, THER EFORE, THE PENALTY LEVIED UNDER SECTION 271D IS CANCELLED. 11. BEFORE US, ON THIS ISSUE, THE LD. DR HAS CONTENDED T HAT IT HAS BEEN CONCLUSIVELY HELD BY THE HONBLE DELHI HIGH COU RT IN THE CASE OF CIT VS. JET LIFE INDIA, 16 TAXMAN.COM 403 (DEL) (C OPY IS PLACED ON RECORD) THAT DEBENTURES ARE LOANS AND THAT FOLLOWING THE LEGISLATIVE AMENDMENT W.E.F. 01.06.2002, LOANS ARE COVERED UNDER SECTIONS ITA NO.5772/DEL/2010 11 269SS AND 269T AND, THEREFORE, THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE DEBENTURES ISSUED BY IT WERE NOT LOA NS AND SO, THE PROVISIONS OF SECTIONS 269SS AND 269T OF THE ACT W ERE NOT APPLICABLE. 12. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS SOUGHT TO PLACE RELIANCE ON THE ORDER DATED 31.08.2012 PASSE D BY THE HONBLE SUPREME COURT OF INDIA IN CIVIL APPEAL NO.9813 OF 2 011, IN SAHARA INDIA REAL ESTATE CORPORATION LTD. AND OTHERS VS. SECU RITIES & EXCHANGE BOARD OF INDIA AND ANR., ALONG WITH CIVIL APPEAL NO.9833 OF 2011 (COPY PLACED ON RECORD). IT HAS BEEN CONTENDE D THAT IN THE SAID CASE, THE HONBLE SUPREME COURT HAS CONCLUSIVELY LAID DOWN THAT DEBENTURES ARE SECURITIES. APROPOS JET LIFE (SUPRA), IT HAS BEEN CONTENDED THAT THE SAID JUDGEMENT WAS DELIVERED PRIOR TO THE AMENDMENT IN LAW. 13. IN THE REJOINDER, THE LD. DR HAS CONTENDED THAT THE DECISION (SUPRA) OF THE HONBLE SUPREME COURT IS WITH REGARD T O THE SEBI REGULATIONS, RENDERED IN THE CONTEXT OF THE COMPANIE S ACT; AND THAT SINCE THIS DECISION IS NOT WITH REFERENCE TO THE IT ACT , THE SAME IS NOT APPLICABLE. 14. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERI AL ON RECORD. UNDISPUTEDLY, THE TERMS LOAN AND DEPOSIT HAVE NOWHERE BEEN DEFINED IN THE IT ACT. THEREFORE, RECOURSE HAS T O BE TAKEN TO THE DEFINITION OF THESE TERMS IN COGNATE ACTS. FOR THE PUR POSES OF THE INCOME TAX ACT, AS SUCH, IN VARIOUS DECISIONS, REFERENCE HAS BEEN MADE, INTER ALIA, TO THE COMPANIES ACT, 1956, THE CO MPANIES (ACCEPTANCE OF DEPOSIT) RULES, 1975, THE SEBI ACT, TH E SECURITIES & EXCHANGE BOARD OF INDIA (DISCLOSURE AND INVESTOR PROTE CTION) GUIDELINES, 2000, THE SECURITIES CONTRACTS (REGULATION ) ACT, 1956, ETC. ITA NO.5772/DEL/2010 12 IN SAHARA INDIA REAL ESTATE CORPN. LTD. & OTHERS (SU PRA), INTER ALIA, THE ASSESSEE HAD CONTENDED THAT OFCDS ISSUED BY IT WERE CO NVERTIBLE BONDS FALLING WITHIN THE SCOPE OF SECTION 28(1)(B) OF THE SCR ACT AND THAT THEY WERE NOT SECURITIES; AND THAT AT ANY RATE , THE PROVISIONS OF THE SEBI ACT AND SECTION 67 OF THE SCR ACT WERE NOT APPLICABLE TO SUCH OFCDS, WHICH HAD BEEN FOUND TO BE HYBRID (IN PARA 106 OF THE JUDGEMENT). IT WAS OBSERVED BY THE HONBLE SUPREME COURT (IN PARA 112) THAT THE OFCDS ISSUED HAD THE CHARACTERISTICS OF SH ARES AND DEBENTURES AND FELL WITHIN THE DEFINITION OF SECTION 2 (H) OF THE SCR ACT, SUCH OFCDS CONTINUING TO REMAIN DEBENTURES TILL THEY W ERE CONVERTED; THAT IN OTHER WORDS, THE OFCDS ISSUED BY THE ASSESSEE WERE DEBENTURES IN PRESENTI AND BECAME SHARES IN FUTURO ; THAT EVEN IF THE OFCDS WERE HYBRID SECURITIES AS DEFINED IN SECTION 2(19 A) OF THE COMPANIES ACT, THEY SHALL REMAIN WITHIN THE PURVIEW O F THE DEFINITION OF SECURITIES IN SECTION 2 (H) OF THE SCR ACT; THAT THE ASSESSEE HAD TREATED THE OFCDS ONLY AS DEBENTURES IN THE IMRHP, APP LICATION FORMS AND ALSO IN THEIR BALANCE SHEETS; THAT THE TERM SECUR ITIES DEFINED IN THE COMPANIES ACT HAS THE SAME MEANING AS THAT IN THE SCR ACT, WHICH WOULD ALSO COVER THE SPECIES OF HYBRID U/S 2(19 A) OF THE ACT; THAT SINCE THE DEFINITION OF SECURITIES U/S 2 (45AA) OF THE COMPANIES ACT INCLUDES HYBRID, SEBI HAS JURISDICTION OVER HYBR IDS LIKE OFCDS ISSUED BY THE ASSESSEE, SINCE THE EXPRESSION SECURITIES HAS BEEN SPECIFICALLY DEALT WITH UNDER SECTION 55A OF THE COM PANIES ACT; AND THAT THE ASSESSEE HAD CONTENDED THAT SEBI HAD NO JURISDI CTION OVER THE HYBRIDS AND THAT HYBRIDS WOULD BE TREATED AS SECURIT IES WITHIN THE MEANING OF THE COMPANIES ACT, BUT CANNOT BE TREATED AS SECURITIES WITHIN THE MEANING OF THE SEBI ACT. DWELLING UPON THE ISSUE AS TO WHETHER HYBRIDS CAN ALSO BE INCLUDED IN THE DEFINIT ION OF THE TERM SECURITIES FOR THE PURPOSES OF THE SEBI ACT, THE HON BLE SUPREME COURT OBSERVED (PARAS 87 AND 88) AS FOLLOWS:- ITA NO.5772/DEL/2010 13 87. AN ATTEMPT SHALL NOW BE MADE TO DETERMINE WHETHER HYBRIDS CAN ALSO BE INCLUDED IN THE DEFINITION O F THE TERM SECURITIES FOR THE PURPOSES OF THE SEBI ACT. FOR TH E AFORESAID ANALYSIS REFERENCE MAY FIRST BE MADE TO SECTION 2 (19A) OF THE COMPANIES ACT WHICH IS BEING EXTRACTED HEREUNDER: 2(19A) HYBRID MEANS ANY SECURITY WHICH HAS THE CHARACTER OF MORE THAN ONE TYPE OF SECURITY, INCLUDING THEIR DERIVATIVES; THE TERM HYBRID IS NOT DEFINED UNDER THE SEBI ACT, AN D CONSEQUENTLY IT MAY BE APPROPRIATE TO ACCEPT THE SAME, AS IT HAS BEEN DEFINED IN THE COMPANIES ACT, SPECIALLY WITH REFERENCE TO AN ISSUE ARISING IN RESPECT OF A PUBLIC COMPANY. O F COURSE, IT WOULD NOT HAVE BEEN APT TO RELY ON SECTION 2(19A) OF THE COMPANIES ACT, IF THE TERM HYBRID HAD ALSO BEEN DEF INED IN THE SEBI ACT OR HAD EVEN BEEN DEFINED IN THE SC(R) AC T ON THE DEPOSITORIES ACT, 1996, BECAUSE SECTION 2(2) OF THE SE BI ACT POSTULATES, THAT WORDS AND EXPRESSIONS USED BUT NOT DEFI NED UNDER THE SEBI ACT, BUT DEFINED IN THE SC(R) ACT OR IN THE DEPOSITORIES ACT, 1996 WOULD BE ATTRIBUTED THE MEANING GIVEN TO THEM IN THE SAID ACTS. BUT THE TERM HYBRID HAS ALS O NOT BEEN DEFINED IN EITHER OF THE AFORESAID ENACTMENTS. T HE TERM HYBRID AS DEFINED IN THE COMPANIES ACT MEANS ANY S ECURITY HAVING THE CHARACTER OF MORE THAN ONE TYPE OF SECURI TY AND INCLUDES THEIR DERIVATIVES. FOR THE PURPOSES OF THE S EBI ACT, THE TERM SECURITIES IS ACCEPTED AS IT IS DEFINED IN SECTION 2(H) OF THE SC(R) ACT. SECTION 2(H) OF THE SC(R) ACT DO ES NOT DEFINE THE TERM SECURITIES EXHAUSTIVELY, BECAUSE CLAU SES (I) TO (IIA) THEREOF, ONLY DEMONSTRATE WHAT MAY BE TREATED AS INCLUDED IN THE DEFINITION OF THE TERM SECURITIES. AND, CLAUSE (I) OF SECTION 2(H) OF THE SC(R) ACT, INCLUDES WITHIN THE DEFINITION OF THE TERM SECURITIES INTER ALIA, BONDS , DEBENTURES AND OTHER MARKETABLE SECURITIES OF A L IKE NATURE. FOR THE PRESENT CONTROVERSY IT IS SUFFICIENT TO NOTICE, THAT THE APPELLANT-COMPANIES THROUGH THEIR RESPECTIV E RHPS HAD INVITED SUBSCRIPTION TO, OPTIONALLY FULLY CONVERTIBL E DEBENTURES (OFCDS). ON RECEIPT OF SUBSCRIPTION AMOUN TS FROM INVESTORS, THE APPELLANT-COMPANIES HAD ISSUED DIFFER ENT KINDS OF BONDS (DESCRIBED AS ABODE BONDS, NIRMAN BONDS AND REAL ESTATE BONDS, BY SIRECL; AND MULTIPLE BONDS, INCO ME BONDS AND HOUSING BONDS, BY SHICL). SINCE THE TERM HYBRID HAS BEEN EXPRESSED AS MEANS ANY SECURITY THERE CA N BE NO DOUBT THAT A HYBRID IS PER-SE A SECURITY. MOREOV ER, THE TERM SECURITY IN ITS DEFINITION INCLUDES OTHER MARKETABL E SECURITIES OF A LIKE NATURE. THEREFORE, EVEN IF FOR ONE OR THE OTHER REASON, THE OFCDS ISSUED BY THE APPELLANT-C OMPANIES MAY NOT STRICTLY FALL WITHIN THE TERMS DEBENTURES OR BONDS (REFERRED TO IN THE DEFINITION OF THE TERM SECURITIES ) THEY WOULD NONETHELESS FALL WITHIN THE AMBIT OF THE EXPRESSIO N ITA NO.5772/DEL/2010 14 SECURITIES OF A LIKE NATURE. FOR THIS, THE REA SONS ARE AS FOLLOWS. THE DEFINITION OF THE TERM HYBRID ALSO E XPLAINS THAT A HYBRID HAS THE CHARACTER OF MORE THAN ONE KIND OF SECURITY OR THEIR DERIVATIVES. THE TERM SECURITIES ALSO INCLUDES DERIVATIVES. THEREFORE, EVEN IF THE DEFINITION O F THE TERM HYBRID IS CONSTRUED STRICTLY, IT WOULD FALL IN THE REALM OF SECURITIES OF A LIKE NATURE. AND IF, SECURITIES O F A LIKE NATURE ARE MARKETABLE, THEY WOULD CLEARLY FALL WITHIN THE E XPANSE OF THE TERM SECURITIES DEFINED IN SECTION 2(H) OF THE SC(R) ACT (AND THEREFORE ALSO, SECTION 2(1)(I) OF THE SEB I ACT). THE OFCDS/BONDS ISSUED BY APPELLANT-COMPANIES WERE A LSO CLEARLY MARKETABLE, BECAUSE THE RHPS ISSUED BY THE TWO COMPANIE S PROVIDED, THAT THE SUBSCRIBERS WOULD BE AT LIBERTY TO TR ANSFER THE OFCDS/BONDS, TO ANY OTHER PERSON. ALTHOUGH, THE TRANSFER OF OFCDS/BONDS WAS TO BE SUBJECT TO THE TERMS AND C ONDITIONS PRESCRIBED, AND THE APPROVAL OF THE APPELLANT-COMPANI ES. IN THE ABSENCE OF ANY PRESCRIBED TERMS AND CONDITIONS BARRING TRANSFER, THE OFCDS/BONDS WERE CLEARLY TRANSFERABLE, AND THEREFORE, MARKETABLE. THE TERM MARKETABLE SIM PLY MEANS, THAT WHICH IS CAPABLE OF BEING SOLD. AL LOWING THE LIBERTY TO SUBSCRIBERS TO TRANSFER THE OFCDS/BONDS MAD E THEM MARKETABLE. THERE IS THEREFORE, NO ROOM FOR ANY DOUBT, THAT THE TERM HYBRID, AS DEFINED IN THE COMPANIES ACT, WO ULD SQUARELY FALL WITHIN THE TERM SECURITIES AS DEFIN ED UNDER SECTION 2(1) (I) OF THE SEBI ACT (I.E., SECTION 2(H ) OF THE SC(R) ACT). 88. IN VIEW OF THE ABOVE IT IS CLEAR, THAT HYBRIDS ARE INCLUDED WITHIN THE TERM SECURITIES NOT ONLY FOR THE PURPOSES O F COMPANIES ACT, BUT ALSO, UNDER THE SEBI ACT. SEBI THE REFORE, WOULD HAVE JURISDICTION EVEN OVER HYBRIDS, EV EN UNDER THE PROVISIONS OF THE SEBI ACT. 15. THUS, IT HAS BEEN HELD THAT HYBRIDS, I.E., HYBRI D SECURITIES, I.E., OFCDS ARE SECURITIES UNDER THE COMPANIES ACT AS WELL A S UNDER THE SEBI ACT. 16. NOW, UNDISPUTEDLY, THE OFCDS OF THE ASSESSEE BEFORE U S ARE NO DIFFERENT FROM THOSE OF SAHARA INDIA REAL ESTATE COR PN. LTD. & OTHERS (SUPRA), I.E., THE ASSESSEE BEFORE THE HONBLE SUPREME COURT IN THE AFORESAID CASE, AND ONCE SUCH OFCDS ARE SECURITIES, THEY ARE NEITHER LOANS, NOR DEPOSITS. FURTHER, IT IS SEEN THAT AS PER EXPLANATION 2 TO SECTION 2 (42A) OF THE INCOME TAX ACT, THE EXPRESSION SECURITY SHALL HAVE THE MEANING ASSIGNED TO IT IN SECTION 2 (H) OF T HE SECURITIES ITA NO.5772/DEL/2010 15 CONTRACTS (REGULATION) ACT, 1956. SECTION 2 (H) (I) OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 DEFINES SECURITIES T O INCLUDE, INTER ALIA, DEBENTURES OR OTHER MARKETABLE SECURITIES OF A L IKE NATURE IN OR OF ANY INCORPORATED COMPANY OR OTHER BODY CORPORATE. 17. HENCE, IN KEEPING WITH THE DECISION OF THE HONB LE SUPREME COURT IN SAHARA INDIA REAL ESTATE CORPN. LTD. & OTH ERS (SUPRA), THE OFCDS OF THE ASSESSEE BEFORE US ARE NEITHER LOANS, NOR DEPOSITS. 18. IN JET LIFE (SUPRA), TRUE, THE HONBLE DELHI H IGH COURT HAS HELD DEBENTURES TO BE COVERED BY THE TERM LOAN. HOWEVE R, THAT DECISION IS DATED 13.12.2011 AND THE HONBLE HIGH COURT OBVIOUSL Y DID NOT HAVE THE BENEFIT OF THE SUPREME COURT DECISION IN SAHAR A INDIA REAL ESTATE CORPN. LTD. & OTHERS (SUPRA), WHICH IS A JUDGEMENT DA TED 31.08.2012, AND WAS NOT AVAILABLE WHEN THE HIGH COURT PASSED ITS OR DER. MOREOVER, THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IS, I T GOES WITHOUT SAYING, THE LAW AS IT ALWAYS STOOD. 19. APROPOS THE OBJECTION TAKEN BY THE DEPARTMENT TH AT THE DECISION OF THE HONBLE SUPREME COURT IS NOT WITH REGARD TO T HE IT ACT, BUT IT RELATES TO THE COMPANIES ACT AND THE SEBI ACT, THERE IS NO DISPUTE TO THIS FACT. BUT, AS DISCUSSED HEREIN BEFORE, SINCE THE IN COME-TAX ACT DOES NOT DEFINE THE TERMS LOAN AND DEPOSIT, RECOUR SE HAS TO BE TAKEN TO COGNATE ACTS AND FOR THE PURPOSES OF DEBENTU RES AND SECURITIES, THE COMPANIES ACT IS OF THE SAME FAMILY, KIND, OR NATURE, OR IS A RELATED OR ALLIED ACT, SO FAR AS CONCERNS THE I NCOME-TAX ACT. THE SAME REMAINS THE POSITION QUA THE SEBI ACT AND THE SEC URITIES CONTRACTS (REGULATION) ACT, 1956, TO THE EXTENT REQU IRED. THEN, IT IS PERTINENT TO NOTE THAT EVEN JET LIFE (SUPRA) MAKE S REFERENCE TO THE COMPANIES ACT, 1956 AND THE COMPANIES (ACCEPTANCE OF DEPOSIT) RULES, 1975. ITA NO.5772/DEL/2010 16 20. THE LD. CIT (A), WHILE ALSO HOLDING THE ABOVE VI EW, THOUGH WITHOUT THE BENEFIT OF THE HONBLE SUPREME COURT DE CISION IN SAHARA INDIA REAL ESTATE CORPN. LTD. & OTHERS (SUPRA), OBSERV ED AS FOLLOWS:- I HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF THE APP ELLANT. THE WORD LOAN OR DEPOSIT IS NOWHERE DEFINED UNDER THE I. T. ACT. THE DEFINITION OF THE WORD LOAN AS GIVEN IN THE BLACKS LAW DICTIONARY IS LENDING. DELIVERY BY ONE PARTY TO AND RECEIPT BY ANOTHER PARTY SUM OF MONEY UPON AGREEMENT, EXPRESS OR IMPLIED TO REPAY IT WITH OR WITHOUT INTEREST. THE ABOVE DEFINITION OF THE LOAN DOES NOT COVER THE MO NEY RECEIVED FOR SUBSCRIPTION OF DEBENTURES. SIMILARLY TH E WORD DEPOSIT HAS BEEN DEFINED THE COMMIT TO CUSTODY, OR TO LAY DOWN, TO PLACE, TO PUT, TO LET FALL (AS SEDIMENT). THE L ODGE FOR SAFE-KEEPING OR AS A PLEDGE TO ENTRUST TO THE CARE OF ANOTHER. IT ALSO INCLUDES MONEY PLACED WITH A PERSON AS AN EARNE ST OR SECURITY FOR THE PERFORMANCE OF SOME CONTRACT. THUS, THE WORD DEPOSIT ALSO DOES NOT HAVE A SEMBLANCE TO THE SUBSCRI PTION RECEIVED FOR ISSUE OF DEBENTURES. THE WORD DEBENTUR E HAS BEEN DEFINED AS A LONG TERM UNSECURED DEBT INSTRUMENT, ISSUED PURSUANCE TO AN INDENTURE. THUS, ON READING OF THE ABOVE DEFINITION, IT IS CLEA R THAT ALL THE THREE DIFFERENT WORDS HAVE SEPARATE MEANINGS. SIMI LARLY, THE DEFINITION OF DEBENTURE UNDER THE COMPANIES ACT AND THAT OF A LOAN OR DEPOSIT ARE DIFFERENT. THE COMPANIES DEPOS IT RULES PROVIDE IN CLAUSE 2(B) THAT DEPOSIT MEANS ANY DEPOSIT OF MONEY AND INCLUDES ANY MONEY BORROWED BY A COMPANY BUT DOE S NOT INCLUDE MONEY RECEIVED BY COMPANY IN CERTAIN CASES. CLAUSE X OF THE EXCEPTION CONTAINED IN RULE 2(B) RULES OF THE D EPOSIT EXCLUDES ANY AMOUNT RAISED BY ISSUE OF BONDS OR DEBE NTURES SECURED TO MORTGAGE BY ANY IMMOVABLE PROPERTY OF THE COMPANY OR WITH AN OPTION TO CONVERT THEM INTO SHARES IN THE COMPANY MEANING THEREBY THAT THE MONIES RAISED ON ISSUE OF BONDS OR DEBENTURES ARE NOT IN THE NATURE OF RECEIP T OF A DEPOSIT. SECTION 2(B) OF THE SECURITIES ACT DEFINES THE WORD SECURITY AND THE WORD LOAN OR DEPOSIT ARE NOT INCLUDED IN TH E DEFINITION OF A SECURITY. SIMILARLY UNDER THE I. T. ACT, SECTION 2(28B) OF THE I . T. ACT DEFINES INTEREST ON SECURITIES TO MEAN- (I) INTEREST ON ANY SECURITY OF THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT; ITA NO.5772/DEL/2010 17 (II) INTEREST ON DEBENTURES OR OTHER SECURITIES FOR MONEY ISSUED BY OR ON BEHALF OF A LOCAL AUTHORITY OR A COMPANY OR A CORPORATION ESTABLISHED BY A CENTRAL STATE OR PROVINCIAL ACT, BUT DOES NOT INCLUDE INTEREST ON LOAN OR DEPOSIT. THUS, THE INTENT OF THE LEGISLATURE IS ABSOLUTELY CLEAR THAT INTEREST ON SECURITY IS DIFFERENT FROM INTEREST ON LOAN OR DEPOSIT. IN THE SAME PARLANCE THE SECURITIES ARE DIFFERENT FROM LOANS AND DEPOSITS AND DEBENTURES IS IN THE NATURE OF A S ECURITY AND IS NOT IN THE NATURE OF ANY LOAN OR DEPOSIT AS ENVI SAGED BY THE PROVISIONS OF SECTION 269SS OF THE I. T. ACT. IT IS ALSO WELL SETTLED LAW THAT INTERPRETATION OF TAXING STATUTES SAME EXPRESSION IN DIFFERENT ENACTMENTS MUST BE GIVEN SAME MEANING. CIT VS BHASKAR METER 202 ITR 612 (COL.) SHANKAR CONST. CO. VS CIT 189 ITR 463 (KAR) IN VIEW OF THE AFORESAID I AM OF THE OPINION THAT DEBE NTURE ISSUED BY A COMPANY IS A SECURITY AND NOT A LOAN OR DEPOSIT AND, THEREFORE, THE SUBSCRIPTION RECEIVED F OR ISSUE OF DEBENTURE CANNOT BE EQUATED WITH RECEIPT OF LOAN OR DEPOSIT WITHIN THE MEANING OF SECTION 269SS OF THE I. T. ACT. THIS VIEW IS ALSO SUPPORTED BY THE DECISION OF THE HON 'BLE SUPREME COURT CITED HEREIN ABOVE WHEREIN THE HON'BLE S UPREME COURT HAS HELD THAT THE INTEREST ON INVESTMENTS (SECURITI ES AND BONDS AND DEBENTURES) WAS NOT IN THE NATURE OF INTEREST ON LOAN OR ADVANCE TO WHICH THE PROVISIONS OF INTERES T TAX ACT WHERE APPLICABLE. THEREFORE, THE MONIES WHICH ARE R ECEIVED BY THE APPELLANT COMPANY BY WAY OF SUBSCRIPTION MONEY FO R ALLOTMENT OF DEBENTURE CANNOT BE EQUATED WITH RESPECT OF ANY DEPOSIT WITHIN THE MEANING OF SECTION 269SS OF THE I. T. ACT AND THE PROVISIONS OF SECTION 269SS WILL NOT BE ATTRACTED TO THE SUBSCRIPTION RECEIVED FOR ISSUE OF DEBENTURE AND, THER EFORE, THE PENALTY LEVIED U/S 271D IS CANCELLED. 21. IT WAS IN THIS MANNER THAT THE LD. CIT (A) CANCEL LED THE PENALTY LEVIED ON THE ASSESSEE U/S 271D OF THE ACT, OBSERVING THE PROVISIONS OF SECTION 269SS OF THE ACT TO BE NOT ATTRACTED. OBVI OUSLY, WHEN THE OFCDS OF THE ASSESSEE DO NOT FALL UNDER AND CANNOT BE E QUATED WITH RECEIPT OF LOAN OR DEPOSIT UNDER THE PROVISIONS OF SECTION 269SS OF THE IT ACT, EVIDENTLY, NO VIOLATION OF THE SAID SECT ION CAN BE SAID TO HAVE BEEN COMMITTED BY THE ASSESSEE. HENCE, PENALTY U/ S 271D OF THE ITA NO.5772/DEL/2010 18 IT ACT IS ENTIRELY NOT ATTRACTED. AS SUCH, THE ORDER OF THE LD. CIT (A) DOES NOT CONTAIN ANY ERROR OR INFIRMITY IN THIS REGAR D. THE SAME IS UPHELD. 22. FOR THE ABOVE REASONS, RESPECTFULLY FOLLOWING THE HONBLE SUPREME COURT DECISION IN SAHARA REAL ESTATE CORPN. LTD. & OTHERS (SUPRA), WE HOLD THAT THE OFCDS OF THE ASSESSEE, SAHARA INDIA COMMERCIAL CORPORATION LTD. ARE NEITHER LOANS, NOR DEPOSITS. 23. NOW, WHEN THE ISSUE AS TO WHETHER OR NOT THE OFCDS OF THE ASSESSEE ARE LOANS COVERED U/S 269SS OF THE IT ACT HAS B EEN DECIDED IN FAVOUR OF THE ASSESSEE AS ABOVE, THE QUESTION OF THE ASSESSEE HAVING BEEN PREVENTED BY REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273B OF THE IT ACT FOR NOT COMPLYING WITH T HE PROVISIONS OF SECTION 269SS OF THE ACT, NO LONGER SURVIVES. FOR TH E PRECEDING DISCUSSION, THE GRIEVANCE SOUGHT TO BE RAISED BY THE DEP ARTMENT BY WAY OF ITS GROUND NO.2, IS REJECTED. ACCORDINGLY, THE ACTION OF THE LD. CIT (A) IN DELETING THE PENALTY IMPOSED ON THE ASSESSEE UNDER SECTION 271D OF THE IT ACT IS CONFIRMED. 24. GROUND NOS.1 AND 2 ARE GENERAL. 25. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 26.08.20 13. SD/- SD/- [T.S. KAPOOR] [A.D. JAIN] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 26.08.2013. DK ITA NO.5772/DEL/2010 19 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES