This appeal by revenue is directed against order of Commissioner (Appeals) cancelling two disallowances made by ITO. 2. assessee is company. Under section 58A of Companies Act, 1956, no company shall invite or accept deposit from public or its members in excess of limits prescribed by Central Government in consultation with RBI. In present case, it is admitted fact that in terms of those conditions prescribed by Central Government company could not invite o r accept any deposit at all. Nevertheless, company had accepted from its members deposits in respect of which interest of Rs. 45,366 was payable in previous year ended 31-3-1979 corresponding to assessment year 1979-80. ITO was of view that this was irregular and illegal and opposed to public policy and, therefore, deduction claimed could not be allowed as expenditure incurred for purpose of business. On appeal, Commissioner (Appeals) noted that it was not ITO's case that borrowals were not required for purpose of business. He also noted that only consequence of any infraction of section 58A was possible prosecution which does not appear to have been taken. He further noted that similar deduction had been allowed as business expenditure in preceding assessment year on same facts. He, accordingly, directed allowance of this deduction for this assessment year also. 3. In this appeal, contention of revenue was that since borrowal itself was in contravention of provisions of Companies Act, liability to pay interest could not be allowed as proper deduction under Income-tax Act, 1961 ('the Act'). We are unable to appreciate this contention of revenue. Under section 58A, no doubt, certain limits are prescribed to ensure that companies which are not in position to repay deposits would not be able to borrow any funds. underlining objective of that provision is protection of depositors whose amounts may be borrowed by company which is not in position to repay amounts and which may generate funds without revealing its actual financial condition. To further ensure and protect interest of depositors, section, provides that in case there is borrowal in contravention of that section, company may be penalised and penalty will be return of deposit within period of one month. It was argued on behalf of revenue that even this provision says nothing about interest payable on deposit and, therefore, there can be no liability to pay interest. This argument also ignores fundamental principles of law relating to contracts which may be void. Even assuming that borrowal made in contravention of section 58A is either illegal as being forbidden by law or opposed to public policy and, therefore, void under section 23 of Indian Contract Act, 1872, liability to pay interest on this deposit could never cease. It has been repeatedly held by Supreme Court that where contract is thus void, section 70 of Indian Contract Act will be attracted and compensation will have to be paid (sic) as deposit was not intended to be given gratuitously and company had enjoyed benefit thereof. Hence, it must be taken as undisputed fact that there is liability of assessee to pay interest and in fact provision was made in accounts to meet that liability. It is also undisputed fact that amounts were borrowed for purpose of business of assessee and, therefore, interest liability was expenditure laid out for purpose of business. It follows that condition prescribed under section 37 of Act is clearly satisfied and Commissioner was right in allowing deduction of this amount. revenue harps upon fact that there was contravention of provisions of Companies Act but it has to be remembered that payment of interest was not consequence of that contravention. If at all any liability could arise out of that contravention, it would be penalty which may be payable and any claim for deduction of penalty may require consideration of question whether such penalty paid in contravention of statutory provisions would be allowable business expenditure. But, this is not issue before us and since we are only concerned with allowability of liability to pay interest, which is normal business expenditure of assessee, we see no reason to interfere with order of Commissioner (Appeals) allowing that deduction. His order is, therefore, confirmed. appeal is dismissed. *** INCOME TAX OFFICER v. CHITRAM AND COMPANY (PRIVATE) LIMITED