INCOME TAX APPELLATE TRIBUNAL, DELHI
S.S. Mehra, B. Gupta, JJ.
Ultra Marine Air Aids (P.) Ltd. -Appellant
Versus
Income Tax Officer -Respondent
IT APPEAL NO. 2135 (DELHI) OF 1985 [ASSESSMENT YEAR 1981-82]
Decided On : 28-11-1986
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 `public', interest to the extent of 15 per cent could not be disallowed out of the interest paid to the directors of assessee private limited company. It is further submitted by him that speech of the Finance Minister who moved the Finance Bill and the Notes on clauses subsequently issued by the CBDT had to be looked into in order to find out the exact intention of the legislature behind any particular enactment and that if the speech of the mover of the Finance Bill was clearly indicative of the intention that interest to the extent of 15 per cent was to be disallowed only on deposits received from public, the ITO and the Commissioner (Appeal) had no justification in disallowing Rs. 10,536 out of interest paid to the three directors of the assessee company. In the end, Mr. Monga has placed reliance on decisions of the ITAT Delhi Benches in the case of Bhandari Machinery Co. (P) Ltd. (IT Appeal No. 3682/Del/81 decided on 25th Oct., 1982) and in the case of Swadeshi International Pvt. Ltd. (IT Appeal No. 2111/Del/84 decided on 10th May, 1985). Mr. Monga has also submitted that the decision of the Special Bench of the ITAT in Kaloomal Shorimal Sachdev Rangwalla (P) Ltd. v. First ITO (1985) 23 TTJ (Bom.) 132 (SB) : (1985) 14 ITD 248 (Bom.) should not be followed as it did not consider the above mentioned points which have been made while arguing this appeal and which had been accepted by the Tribunal while deciding the appeals in the abovementioned cases.
3. On the other hand, Smt. Sushma Trivedi, learned Departmental Representative has supported the order of the Commissioner (Appeal) and contended that the disallowance of interest to the extent of 15 per cent was wholly justified being in accordance with the language of section 40A (8) of the Act.
4. We have considered the rival points of view. According to us, the speech of the mover of Bill in Parliament or the Notes on Clauses can be used as aids of interpretation only when the language of an enactment is not clear but ambiguous. On the contrary, where there is no ambiguity and the provisions of a section are not capable of more than one interpretation, resort need not be made to any external aid of interpretation. The provisions of section 40A (8) provide that where an assessee being a company other than a banking or financial company, incurs any expenditure by way of interest in respect of any deposit received by it, 15 per cent of such expenditure will not be allowable as deduction. These provisions do not anywhere refer to the deposits from public. These refer to all deposits which may be from any one including the shareholders or directors of a company. The word `deposit' has been defined in Explanation (b) of section 40A (8) and it means `any deposit of money and includes any money borrowed by
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