IFB Agro Industries Ltd. vs. Joint Commissioner of Income-tax In the Income Tax Appellate Tribunal ‘B’ Bench Kolkata Before P. K. Bansal (A. M.) and George Mathan (J. M.) ITA No. 1721/Kol/2012 Assessment Year: 2009-10. Decided on 12th March, 2013 Counsel for Assessee / Revenue: S. K. Tulsiyan / Ajoy Kr. Singh

Facts
The assessee had received Inter-corporate deposits of Rs. 11.20 crore. from IFB Automotive Pvt. Ltd., a company wherein the assessee held 18.82% of the shares. The said deposit was treated by the AO as a loan and invoking the provisions of section 2(22) (e), he taxed the said receipt as income of the assessee. On appeal, the CIT(A) confirmed the order of the AO.

Before the tribunal, the revenue supported the orders of the lower authorities and further relied on the decision of the Bombay High Court in the case of Star Chemicals Pvt. Ltd. reported in 203 ITR 11, wherein it has been held that a loan to a shareholder to the extent to its accumulated profits was liable to be treated as deemed dividend.

Held
The tribunal noted that the dispute primarily revolves around the issue as to whether the Inter corporate deposits received by the assessee from M/s. IFB is a ‘loan’ or ‘advance’ or is a ‘deposit’. It further noted that the provisions of section 2(22)(e) refers to only ‘loans’ and ‘advances’ it does not talk of a ‘deposit’. According to the tribunal, the fact that the term ‘deposit’ cannot mean a ‘loan’ and that the two terms ‘loan’ and the term ‘deposit’ are two different and distinct terms, is evident from the explanation to section 269T as also section 269SS of the Act where both the terms are used. Further, it was noted that the second proviso to section 269SS of the Act recognises the term ‘loan’ taken or ‘deposit’ accepted. The tribunal then observed that once it is accepted that the terms ‘loan’ and ‘deposit’ are two distinct terms which has distinct meaning then, if term ‘loan’ is used in a particular section, the deposit received by an assessee cannot be treated as a ‘loan’ for that section.

Further, on perusal of the decision of the Special Bench of the Ahmedabad bench Tribunal in the case of Gujarat Gas & Financial Services Ltd. reported in 115 ITD 218 which had taken into consideration the decision of the Special Bench of the Delhi Tribunal in the case of Housing & Urban Development Corporation Ltd. reported in 102 TTJ (SB) 936 and of the Bombay tribunal in the case of Bombay Oil Industries Ltd. reported in 28 SOT 383, the tribunal opined that the Inter corporate deposits cannot be treated as a loan falling within the purview of section 2(22)(e) of the Act. Accordingly, the addition representing inter-corporate deposits treated as loan by the AO and confirmed by the CIT(A) was deleted by the tribunal.

As regards the decisions relied on by the CIT(A) as also by his counsel before the tribunal, it observed that the same were on ‘loans’ and none of the decisions referred to by them discussed anywhere that deposits were to be treated as loans.