Madras High Court
The Commissioner Of Income Tax vs M/S.Idhayam Publications Limited on 23 January, 2006
Author: P.P.S.Janarthana Raja
Bench: P.D.Dinakaran, P.P.S.Janarthana Raja
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 23/01/2006
Coram
THE HON'BLE MR.JUSTICE P.D.DINAKARAN
AND
THE HON'BLE MR.JUSTICE P.P.S.JANARTHANA RAJA
Tax Case (Appeal) No.1315 of 2005
The Commissioner of Income Tax
Tamil Nadu-I, Madras ..Appellant
-Vs-
M/s.Idhayam Publications Limited,
No.57, Thiru-Vi-Ka Industrial Estate,
Guindy, Chennai-600 032. ..Respondent
Appeal under Section 260-A of the Income Tax Act, 1961 against the
order of the Income Tax Appellate Tribunal, Madras, 'B' Bench in I.T.A.
No.1187/Mds/1998 dated 13.07.2004, for the assessment year 1992-93.
!For Appellant : Mr.J.Narayanaswamy
^For Respondent: ---
:JUDGMENT
(Judgment of the Court was delivered by P.P.S.Janarthana Raja, J.) The present appeal is filed under Section 260-A of the Income Tax Act, 1961 by the Revenue, in I.T.A. Nos.1187/Mds/1998 dated 13.07.2004 , passed by the Income Tax Appellate Tribunal, Madras "B" Bench raising the following formulated substantial question of law.
"Whether on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the penalty levied under Section 271 D of the Income Tax Act, even though the Supreme Court held that Section 269SS is constitutionally valid in law?"
2. The assessee is running a company in the name of M/s.Idhayam Publications Private Limited for publication of books. The relevant assessment year is 1992-93. In the assessment proceeding, the Assessing Officer noted that the assessee had accepted a cash loan of Rs.2,94,00 0/- from M/s.Manian Creations, a sister concern, in violation of the provisions of Section 269SS of the Act. With the above information, the Deputy Commissioner of Income Tax initiated penal proceedings under Section 271-D and issued a show cause notice dated 19.09.1997 to the assessee. In response, the assessee filed a letter dated 27.09.19 97 stating that the transaction between the assessee and Mr.S.V.S. Manian, Proprietor of Manian Creation, was current account in nature and was not a loan or deposit. The Deputy Commissioner of Income Tax rejected the contention and was of the view that there was a clear violation of provisions of Section 271-D and levied a penalty of Rs.2,94,000/- under Section 271-D of the Act.
3. Aggrieved by the order, the assessee filed an appeal to the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax ( Appeals) held that eventhough there was a reasonable cause to hold that there was a violation of the provision under Section 269SS which attracted penalty under Section 271-D, it has referred the Madras High Court Judgment in the case of Kumari A.B.Shanthi (alias) Vennira Adai Nirmala Vs. Assistant Director of Inspection & Investigation, reported in 197 ITR 330, which declared that Section 269SS is unconstitutional. Aggrieved by that order, the Revenue filed an appeal before the Income Tax Appellate Tribunal and contended that the Supreme Court has reversed the decision of the Madras High Court Judgment in 197 ITR 3 30 and held that Section 269SS is constitutionally valid and therefore the penalty levied by the Assessing Officer ought to be considered. The Tribunal, on hearing the arguments, held that, on merits, the transaction does not fall within the meaning of loan or advance and hence there is no violation of Section 269SS.
4. We heard the arguments of the learned counsel for the Revenue. We have perused the materials available in record. Admittedly Mr.S.V. S.Manian was one of the Directors. Therefore the order of the lower authority clearly shows that there was a running current account in the books of account of the assessee in the name of Mr.S.V.S.Manian. Mr.S.V.S.Manian used to pay the money in the current account and used to withdraw the money also from the current account. The Revenue should establish that what was received by the assessee is a loan or deposit within the meaning of Section 269SS. The deposit and the withdrawal of the money from the current account could not be considered as a loan or advance. Further it was also found that the assessee filed a letter dated 29.09.97 and in that letter he explained that the amount received from Mr.S.V.S.Manian had been shown as "unsecured loan from directors" in the Balance Sheet. As per the Companies Act, under Companies (Acceptance of Deposit) Rules 1975, under Rule 2(b)(ix), deposit does not include any amount received from a Director or a share holder of a Private Limited Company. Therefore the transaction between the appellant and the Director cum Share holder is not a loan or deposit and it is only current account in nature and no interest being charged for the above transaction.
5. In the foregoing conclusions, we are of the view that, since the said transaction does not fall within the meaning of loan or advance, there is no violation of Section 269SS of the Income Tax Act. We find no error in the order of the Trib the same requires no interference. Hence, no substantial question of law arises for consideration of this Court. Accordingly, we dismiss the above tax case. No costs.
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