NATIONAL ENGG INDS LTD Vs. CIT

JUDGEMENT

(1.) These 21 appeals - 17 by the assessees and 4 by the revenue - arise under the Interest Tax Act, 1974. All these appeals are against the orders of the Commissioner (Appeals) for various assessment years. Since they involve common dispute, they are being disposed of by this common order for the sake of convenience.

(2.) An interesting question in these appeals arise and that is with regarding to the scope of applicability of provision of Interest Tax Act, 1974 to a company which is not a financial company, in its ordinary meaning. The assessee in these cases are engaged in manufacture of bearing, rubber goods, wagons, textile machines and other engineering items; manufacturing sugar; tea plantation or growing agricultural produce, etc. These companies, however, issued debentures and received deposits from employees and in some case also from public to finance their day to day requirement of running the aforesaid businesses carried on by them.

(3.) The claim of the revenue is that the assessee-company received deposits by way of contribution to debentures under a scheme or arrangement and, therefore, it is a residuary non-banking financial company and, consequently, a credit institution within the meaning of section 2(5A), read with sub-section (5B)(va) of the Act and, therefore, liable to tax on their interest income earned on loans and advances given. In some of the cases, the deposits have been received from the employees of the assessee-company and on that ground too, these clauses are made applicable by the assessing officer referred to the RBI's guidelines and stated that the debentures have not been excluded from the definition of deposit under the said guidelines and, therefore, the debentures are to be treated as a deposit.