1997 Supreme(Del) 947

High Court Of Delhi
BAIDYA NATH PLASTIC INDUSTRIES PRIVATE LIMITED - Appellant
Versus
INCOME TAX OFFICER - Respondent
CRIMINAL APPEAL 162 of 1997
Decided On : 11/25/1997

Headnote:Income Tax Act, 1961 - Section 269T r/w 276E — Mode of repayment — Contravention of provisions of — Scope and ambit-Applicability-Income Tax (IInd Amendment) Act, 1981 — Effect of — Prosecution — Repayment in cash — Violation of — Criminal complaint against respondent Under Section 276E — Acquitted — Revision — Reversed by ASJ and held repayment was towards deposit contemplated Under Section 269T — Repayment towards "loan" and "deposit" — Determination of — Petitioner pleaded second amendment not applicable towards deposit under proviso to Section 269T — Distinction between "loan" and "deposit" — Transaction was in the nature of loan — Prosecution not warranted.

       Held:

       The above said section shows that the aggregate amount of deposits held by a company shall not be repaid to any person otherwise than by an account payee cheque or account payee bank draft where the amount of deposit, or where the amount of deposit is to be repaid together with any interest, the aggregate of the amount of the deposit and such interest, is ten thousand rupees or above, after the Income-tax (Second Amendment) Act, 1981, received the assent of the President of India . The President of India assented to the Amendment Act on September 19, 1981. It is not disputed that the repayment was made after the Amendment Act was assented to by the President of India. Learned counsel for the petitioner submitted that Section 269T(2) of the Act will not be applicable if the repayment was towards deposit as under second proviso to Section 269T(1) nothing in the said sub-section will apply to or in relation to any repayment of any deposit on or after the date on which the Income-tax (Second Amendment) Act, 1981, received the assent of the President of India. It does appear to me that this sub-section is not applicable as the assent of the President of India was received earlier to the repayment, but Clauses (a) and (b) of Sub-section (2) of Section 269T would undoubtedly be applicable if the repayment in the instant case was made in relation to deposits as the repayment was made after September 19, 1981 when the President of India assented to the Amendment Act. Now the only question which remains to be determined is whether the repayment was towards deposit or the same was towards loan. In order to determine this question it will be necessary to consider whether the meaning of the term deposit ascribed by the Explanationn to Section 269T includes the term loan in its ambit. The distinction between the loan and the deposit is that in the case of the 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 to the depositee, 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 term "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. An assessed must know as to which of his acts would violate a penal provision of astatine, as otherwise unwittingly he may fall in the net cast by a penal provision. In case two interpretations are possible, an interpretation which takes out an assessed from the clutches of a penal provision must be preferred.

       It is, thereforee, obvious that the complainant itself conceded in me above said notice that the transactions for receipt was in the nature of a loan. This being the situation, there was no justification for the complainant to invoke Sections 269T read with Section 269E of the Income-tax Act. The prosecution of the petitioners, thereforee, was not warranted.

       Head Note:

       INCOME TAX Repayment of certain deposit — APPLICABILITY OF S. 269T — Repayment of ``loan in contravention of s.269T.

       There was no justification for the complaintant to invoke section 269T r/w section 276E in the circumstances of the case as there was repayment of `loan and not ``deposit.

       Held : (i) It does appear that sub-section (1) of 269T is not applicable as the assent of the President of India was received earlier to the repayment, but clauses (a) and (b) of sub-section (2) of section 269T would undoubtedly be applicable if the repayment in the instant case was made in relation to deposits as the repayment was made after 19-9-1981 when the President of India assented to the Amendment Act. (ii) The distinction between the loan and the deposit is that in the case of the 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 to the depositee, as the case may be, and make a demand for it. This distinction was adopted by the Lahore High Court in the case of Gurcharan Das v. Ram Rakha Mal AIR 1939 Lahore 81. Similar view was expressed by a Division Bench of the Oudh High Court in the case of Chaturgun v. Shahzady AIR 1930 Oudh 395. While drawing the distinction between the words deposit and loan the court relied upon two earlier decisions of the Madras High Court in V. Balakrishnadu v. Narayanswamy Chetty 24 IC 852 (Mad) and Kishtappa Chetty v. Lakshmi Ammal, 72 IC 842 (Mad). It may also be noted that while articles 19 and 21 of the Limitation Act fix the period within which 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. Under articles 19 and 21 the cause of action in the case of money lent arises from the date of loan, whereas under article 22 the cause of action in the case of a deposit arises from the date of demand. thereforee, it is necessary to distinguish a deposit from a mere loan. 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 contra- distinction to the term "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. An assessed must know as to which of his acts would violate a penal provision of a statute, as otherwise unwillingly he may fall in the net cast by a penal provision. In case two interpretations are possible, an interpretation which takes out an assessed from the clutches of a penal provision must be preferred. (iii) The complainant in the show cause notice dated 2-3-1987 clearly stated that the petitioners raised a loan and a payment was made in cash with reference to the same. It is, thereforee, obvious that the complainant itself conceded in the said notice that the transactions for receipt were in the nature of a loan. This being the situation, there was no justification for the complainant to invoke sections 269T read with section 276E. The prosecution of the petitioners, thereforee, was not warranted.

       Income Tax Act 1961 s.269T

       Income Tax Act 1961 s.276E