K.T. THAKORE, A.M. This appeal relates to asst. yr. 1980-81. first ground raised in this appeal relates to disallowance of interest under s. 40A(8) of Act. assessee had claimed deduction of interest of Rs. 3,33,235 which was paid interest on deposits. ITO in view of provisions of s. 40A(8) of Act disallowed 15 per cent of said amount of interest and thereby disallowed sum of Rs. 49,984. Being aggrieved assessee carried matter in appeal before CIT(A) and contended that out of total amount of interest as aforesaid sum of Rs. 2,01,258 related to interest paid to various agents on their deposits. This contention stood rejected by CIT(A) on ground that deposits were not in nature of security deposits and therefore, assessee was not entitled to exclude said amount as claimed by it. Being aggrieved assessee is in appeal before us. It was submitted that assessee had received deposits from their agents from time to time and that said agents had maintained "current account" with assessee. Therefore assessee's claim was covered by Explanation (b)(vii) of s. 40A(8) of Act. ld. departmental representative on other hand supported orders of authorities below. We have considered rival submissions. In order to appreciate controversy we refer to aforesaid provisions which read as follows: (8)(b) "deposit" means any deposit of money with, and includes any money borrowed by, company, but does not include any amount received by company (vii) by way of security or as advance from any purchasing agent, selling agent or other agent in course of , or for purpose of, business of company or as advance against orders for supply of goods or for rendering of any service". above Explanation carves out exception under which security or advance from purchasing or selling agents or other agents in course of business of company is not to be treated as "deposit" for purpose of s. 40A (8) of Act. As corollary interest paid on such deposits is to be excluded for purpose of disallowance of interest as laid down in said section. On facts it is clear (from copies of accounts placed before us) that assessee has received deposits from agents from time to time and there are series of transactions which are in nature of sarafi transactions. fact that deposit is received from agents is not disputed by authorities below. In this connection it may not be out of place to mention that Tribunal in case of M.E. Private Limited vs. ITO (1981) 11 TTJ 299 (Bom) have explained scope of s. 40A(8) of Act. In para 4 of its order it is held that there is difference between deposit and "deposit in current account" and that expression "deposit" in sec. 40A(8) does not apply to deposits in current account by directors. On parity of reasoning deposits in question before us cannot be treated as "deposit" contemplated in s. 40A(8) of Act. We, therefore, hold that disallowance of interest was not justified. next ground relates to levy of interest of Rs. 16,245 under s. 139(8) of Act. At time of bearing of this appeal point regarding levy of interest under s. 215 was not pressed on behalf of assessee. only contention therefore was confined to levy of interest under s. 139(8) of Act. return of income was filed on 30th Dec., 1980 though same was due on or before 31st July, 1980. In view of delay in filing return ITO directed that interest under s. 139(8) should be levied. assessee challenged this decision before CIT(A) who held that assessee had no right of appeal against levy of interest. He therefore declined to consider assessee's claim on merit. After hearing parties we are of view that CIT(A) had clearly overlooked decision of their Lordships of Gujarat High Court in case of Bhikhoobhai N. Shah vs. CIT 1978 CTR (Guj) 172: (1978) 114 ITR 197 (Guj) in which it is held that assessee can challenge its liability to be assessed which would include denial of liability to be assessed at all to penal interest. Therefore in our opinion CIT (A) was not right in his conclusion that he had no right of appeal against levy of said interest. We therefore remit matter to him and direct him to consider claim of assessee on this point on merit. appeal is treated as partly allowed. *** JAGDISH PROCESSORS PVT. LTD. v. INCOME TAX OFFICER