Law:

Section:

Section 2(7), read with section 5 of the Interest-tax Act, 1974 - Interest - Inter-corporate deposit cannot be held in nature of loan or advance within meaning of section 2(7) [In favour of assessee] The expression 'advance' occurring in section 2(7) along with the expression 'loan' should take its colour from 'loan' and cannot be given wider interpretation to include deposit as well. Otherwise, money deposits given for investments, etc., would also qualify as 'advances' and interest thereon would become exigible to the Interest-tax Act. Such a situation was never contemplated by the legislature. Hence, inter-corporate deposit is not in the nature of loan or advance within the meaning of section 2(7) and, therefore, not chargeable to the interest-tax under section 5. CASES REFERRED TO Baidya Nath Plastic Industries (P.) Ltd. v. K.L. Anand, ITO [1998] 230 ITR 522 (Delhi), Bajaj Auto Holdings Ltd. v. Deputy CIT [2006] 281 ITR (AT) 154 (Mum.), V.Balakrishnudu v.Narayanaswamy Chetty [1914] 24 IC 852 (Mad), Chaturgun v. Shahzady [1930] AIR 1930 Oudh 395, CIT v. Corporation Bank[2007] 295 ITR 193 (SC), CIT v. Lakshmi Vilas Bank Ltd.[1997] 228 ITR 697 (Mad), CIT v. Ratnakar Bank Ltd. [2008] 306 ITR 257 (SC), CIT v.Sahara India Savings and Investment Corporation Ltd. [2003] 264 ITR 646 (All.), CIT v.Vikramajit Singh [2007] 292 ITR 274 (Delhi), Gurcharan Das v. Ram Rakha Mal AIR 1937 Lahore 81, Kishtappa Chetty v. Lakshmi Ammal AIR 1923 Mad 578; [1923] 72 IC 842, A.M. Shamsudeen v. Union of India [2000] 244 ITR 266 (Mad) and Shanti Prasad Jain v. Director of Enforcement, Foreign Exchange Regulation Act [1963] 33 Comp Cas 231(SC). Ms. Suruchi Aggarwal for the Appellant. Ajay Vohra, Ms. Kavita Jha and Somnath Shukla for the Respondent. JUDGMENT A. K. Sikri, J. - In these three appeals, the assessee as well as the questions of law which arose is common. The appeals are admitted on the following substantial questions of law : "(i) Whether the Income-tax Appellate Tribunal was correct in law in holding that the interest earned by the assessee from M/s. SWC was not chargeable to interest-tax under section 5 of the Interest-tax Act ? (ii) Whether the amount given to M/s. SWC…

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