S.S.MEHRA, B.GUPTA
Ultra Marine Air Aids (P. ) Ltd. – Appellant
Versus
Income Tax Officer – Respondent
Advocates Appeared:
P. N. Monga,Sushma Trivedi
ORDER
B. Gupta, Accountant Member - In the various grounds and sub-grounds raised in this appeal filed by the assessee private limited company, objection is taken to the disallowance under section 40A (8) of the Income-tax Act, 1961 of interest to the extent of Rs. 10,536 out of interest paid to the three directors of the company.
2. Shri P.N. Monga, learned Advocate, authorised counsel of the appellant has very vehemently contended that the disallowance was not permissible under the provisions of section 40A (8). According to him, moneys borrowed by a private limited company from its directors do not tantamount to deposits within the meaning of section 40A (8) and, therefore, no part of interest paid to them could be curtailed under that section. Referring to the speech of the Finance Minister delivered at the time of presenting the Finance Bill 1975 by virtue of which the provisions of section 40A (8) were ultimately introduced in Income-tax Act, 1961, and the Notes on Clauses, the learned counsel says that only interest could be disallowed under 40A (8) which was paid on deposits taken from the public and that since the directors of a private limited company did form part of the
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