AHMEDABAD BENCH UTKARSH FINCAP (P) v. INCOME TAX OFFICER LTD. November 30, 2005 JUDGMENT ORDER R.P. Garg, Vice President: These six appeals by assessee are against orders of CIT(A) for asst. yrs. 1998-99 to 2000-01 arising out of assessment orders and penalties levied by AO. For sake of convenience, they are being disposed of by this common order. dispute in all these appeals is as to whether income from interest on inter-corporate deposits was chargeable to tax under Interest-tax Act or not and their consequent assessment entails penalty under s. 13 of said Act. In assessments, AO has observed as under: "Since assessee-company s activity is to give inter-corporate deposits and making investments in shares of other companies, assessee-company is covered by sub-cls. (ii) and (iv) of s. 2(5B) of Interest-tax Act, 1974." CIT(A) agreed with assessments by observing in para 2.3 of his order as under: "2.3 I have carefully considered observation made by AO in assessment order, detailed submission as advanced by counsel of appellant along with case laws and I am of opinion that AO is fully justified in observing that main business of appellant-company is to give loans and advances, bill discounting, investments, equity participation, etc. especially when memorandum of association of appellant-company itself narrates such activities i.e., to carry on all kinds of financial operations including long-term, short-term loans and capital, bridge loans, working capital, bill discounting, bill purchasing and deferred payment, equity participation, preferential capital bonds, giving of guarantees, counter guarantees, indemnities and sureties, etc. case laws as relied upon by appellant s counsel are not applicable in case of appellant and I am inclined to agree with conclusion arrived at by AO that appellant is covered by sub-cl. (iv) of s. 2(5B) of Interest-tax Act. In view of above facts, I don t see any reason to interfere in action of AO in charging income under Interest-tax Act for both assessment years. action of AO is hereby confirmed." dispute, it seems, has proceeded on basis as to whether assessee is chargeable entity under Interest-tax Act in view of sub-cl. (iv) of s. 2(5B) of Act. submission before us in all these appeals, is that even if it were chargeable entity, interest on inter-corporate deposits is not assessable in view of decision of Tribunal in case of Gujarat Industrial Investment Corpn. Ltd., Interest-tax Appeal No. 3/Ahd/1997 for asst. yr. 1993-94 and others dt. 31st Jan., 2005. learned counsel of assessee has relied upon decisions some of which though are not directly on issue but make distinction between deposit and loan. These are (i) CIT vs. Sahara India Savings & Investment Corpn. (2003) 185 CTR (All) 136: (2003) 264 ITR 646 (All); (ii) CIT vs. United Western Bank Ltd. (2003) 181 CTR (Bom) 285: (2003) 259 ITR 312 (Bom); (iii) Baidya Nath Plastic Industries (P) Ltd. vs. K.L. Anand, ITO (1998) 146 CTR (Del) 421: (1998) 230 ITR 522 (Del); (iv) A.M. Shamsudeen vs. Union of India (2000) 164 CTR (Mad) 466: (2000) 244 ITR 266 (Mad); (v) decision of Tribunal in case of Oriental Insurance Co. Ltd. vs. Dy. CIT (2004) 82 TTJ (Del) 1084: (2004) 89 ITD 520 (Del); and (vi) Sahara India Savings & Investment Corpn. Ltd. vs. Asstt. CIT (2001) 73 TTJ (All) 930: (2001) 79 ITD 56 (All) wherein interest from deposit and security deposits are held to be not interest on loans and advances. learned Departmental Representative, on other hand, relied upon decision of Mumbai Tribunal in case of Bajaj Auto Holdings Ltd. vs. Dy. CIT (2005) 96 TTJ (Mumbai) 856: (2005) 95 ITD 356 (Mumbai) wherein it was held that interest on deposit is interest on advance. Here in this case, decision of Delhi Tribunal in (2004) 82 TTJ (Del) 1084: (2004) 89 ITD 521 (Del) (supra) was not discussed. We have heard parties and considered their rival submissions. Sec. 4 of Interest-tax Act is charging section and it reads as under: "4. Charge of tax. Subject to provisions of this Act, there shall be charged on every scheduled bank for every assessment year commencing on or after 1st day of April, 1975, tax (in this Act referred to as interest-tax) in respect of its chargeable interest of previous year at rate of seven per cent of such chargeable interest." term "interest" is defined in s. 2(7) of said Act as under: "(7) interest means interest on loans and advances made in India and includes (a) commitment charges on unutilized portion of any credit sanctioned for being availed of in India; and (b) discount on promissory notes and bills of exchange drawn or made in India, but does not include (i) interest referred to in sub-s. (1B) of s. 42 of RBI Act, 1934 (2 of 1934); (ii) discount on treasury bills." interest received by assessee is interest from inter-corporate deposit. These inter-corporate deposits are governed by s. 58A of Companies Act invested through issue of prospectus required under Companies Act. To assess person under this Act, we have to examine whether interest is received by assessee on loans and advances and in that context, we have to understand what loan and deposit means. terms "deposit" and "loan" have come up before Courts in many cases which are discussed hereunder. Privy Council in case of Mohd. Akbar Khan vs. Attar Singh AIR 1936 PC 171 observed with regard to true concept of "loans and deposits" as under: "It should be remembered that two terms ( deposit and loan ) are not mutually exclusive. deposit of money is not confined to bailment of specific currency to be returned in specie. As in case of deposit with banker, it does not necessarily involve creation of trust, but may involve only creation of relation of debtor and creditor, loan under conditions. This distinction which is perhaps most obvious is that deposit not for fixed term does not seem to impose immediate obligation on depositee to seek out depositor and repay him. He is to keep money till asked for it. demand by depositor would therefore, seem to be normal condition of obligation of depositee to repay." Supreme Court in case of Ram Janki Devi vs. Juggilal Kamlapat AIR 1971 SC 2551 held as under: "12. case of deposit is something more than mere loan of money. It will depend on facts of each case whether transaction is clothed with character of deposit of money. surrounding circumstances, relationship and character of transaction and manner in which parties treated transaction will throw light on true form of transaction." Again, in case of Ram Rattan Gupta vs. Director of Enforcement, Foreign Exchange Regulation AIR 1966 SC 495, Supreme Court in context of s. 4 of FERA of 1947 discussed definition between loan and deposit as under: "The expression to lend in ordinary use means to deliver to another thing or on condition that thing lent shall be returned with or without compensation for use made of it by person to whom it lent. subject- matter of lending also be money. Though loan contract created debt, there may be debt and without contracting loan, in other words, concept of debt is more comprehensive than that of loan. It is settled law that relationship between banker and customer qua debtor and creditor. Though, ordinarily deposit of amount in current account of bank creates debt it does not necessarily involve contract of loan. question whether deposit amounts to loan depends upon terms of contract under which deposit is made. AIR 1962 SC 1764 Ref. to. When person deposits foreign currency in current account of bank in order to draw it whenever necessary for purpose for which it was given, it cannot be said that he enters into contract of loan with bank within meaning of s. 4(1) of Act. He only deposits money for said purpose, such deposit is not loan, person cannot be held to have contravened s. 4(1) of Act." Madras High Court in case of Abdul Hamid Sahib vs. Rahmat Bi AIR 1965 Mad 427 also considered definition between loan and deposit as under: "The terms loans and deposits are not mutually exclusive terms. There are number of common features between two. In sense deposit is also loan with this difference that it is loan with something more. Both are debts repayable. But, question as to when repayment is to be made furnishes real point of distinction between two concepts. loan is repayable minute it is incurred. But this is not so with deposit. Either repayment will depend upon maturity date fixed therefor or terms of agreement relating to demand, on making of which deposit will become repayable. In other words, unlike loan there is no immediate obligation to repay in case of deposit. That is essence of distinction between loan and deposit." Madhya Pradesh High Court in case of Sharda Talkies (Firm) vs. Smt. Madhulata Vyas AIR 1966 MP 68 observed as under: "There is subtle distinction between deposit and loan. In case of loan, amount is given by creditor to debtor at request of and for requirements and dues of debtor under certain terms and conditions. In case of deposit, depositee receives money at instance of depositor. In case of deposit, requirement of depositee is neither relevant nor material. depositor has to go to depositee for depositing amount or depositee may go and collect amount. But in case of loan, debtor has to request creditor to advance certain amount for meeting his requirement for using amount. However, question in given case whether debit is deposit or loan will be one of fact which will have to be decided on facts and circumstances of each case. use of term loan or deposit may not itself be conclusive, though, of course, it is circumstance which would be taken into account. What should be regarded is cumulative effect of evidence which bears on character of debt as loan or deposit. Where certain amount are paid or given by particular person to other without there being requirement of person receiving same, without applying above test, it would certainly be deposit. This is only distinction." Bombay High Court in case of Pennwalt (India) Ltd. vs. Registrar of Companies (1987) 62 Comp Cas 112 (Bom) discussed concept of loan and deposit with reference to ss. 58A and 227(1A)(d) as under: "Held, allowing petition, that there was distinction between loan and deposit for purpose of Companies Act, 1956, and in absence of anything to hold that deposits made by appellant-company with well- known independent companies were in fact loans or amounts lent by appellant-company and borrowed by those companies, they had to be considered as deposits for purposes of s. 370. Sec. 371 laid down penal consequences for failure to comply with provisions of s. 370. Since non- compliance involved penal consequences, s. 370 could not be given interpretation wider than that warranted by actual words used therein. Without any provision to that effect, word loan as used in s. 370 could not be given wider interpretation so as to include deposits." Similar was observation of Madras High Court in case of A.M. Shamsudeen (supra) wherein it was held as under: "Held that, in instant case, CIT as well as Dy. CIT had accepted fact that assessee-firm had repaid loan in cash. Further, Dy. CIT had also accepted that assessee-firm had borrowed certain sums of money which were regarded as loan transactions. It was not possible to enlarge scope of term 'deposit in s. 269T of Act to include transaction of loan. Therefore, allegation that there was violation of provisions of s. 269T and subsequent levy of penalty under s. 271E was not justified in law." In case of Sahara India Savings & Investment Corpn. Ltd. (supra) before Allahabad High Court, question was as to whether deposits under various schemes were "loans" and "advances" interest on which is chargeable under Interest-tax Act. Tribunal in this case as reported in (2001) 73 TTJ (All) 930: (2001) 79 ITD 56 (All) (supra) observed that: "The Companies Act also make distinction between loan and advances and investments in securities and debentures. Therefore, investment in securities and debentures is not same as loans or advances envisaged in s. 2(7) and consequently interest on securities and debentures cannot be equated or take colour of such interest of loans or interest on advances . interest on investment in securities or debentures is, therefore, outside scope of definition of interest given under s. 2(7), which otherwise means that interest on investments made in securities and debentures by assessee was not taxable. To sum up (i) definition of term interest given under s. 2(7) was exhaustive and general meaning of term interest could not be read into it, (ii) it was only interest on loans and advances which was within ambit of definition of term interest and consequently, liable to interest- tax, and (iii) assessee s investments in securities, debentures and FDs, etc. being investments as per Reserve Bank s directions were for carrying on business of residuary non-banking company and could not partake character of investment by way of loans and advances and consequently income therefrom could not take colour of "interest on loan or interest on advances". Revenue in that case, contended that since earlier definition of s. 2(7) specifically excluded interest on securities from definition of "interest", while new definition of word "interest" does not specifically exclude interest on securities, legislative intend was obviously that now interest on securities will also be treated as interest within meaning of s. 2(7) of Act. This contention of Revenue was not accepted by High Court. In case of United Western Bank Ltd. (supra), Bombay High Court held that Interest-tax Act applies strictly to loans and advances and not to investment and, therefore, this Act would not apply to interest by assessee- bank on securities/debentures held by assessee under category "permanent". In this case also, contention of Revenue was that prior to amendment word "interest" in s. 2(7) of Act excluded by express provision interest on securities and when it was reintroduced then legislature deleted exclusionary clause from s. 2(7) which indicated intention of legislature to tax interest on securities and that there is no difference between investment and loan and when bank subscribes to Government securities, it gives loan to Government although in balance sheet it is shown as investment. In that context, Bombay High Court held that difference between "loan" and "investment" is well known in commercial sense, accounting sense and also under Companies Act (see ss. 370 and 372). It is also borne out by s. 13(1)(d) and s. 11(5) of Act. It also borne out by s. 2(28A) of IT Act, 1961 and s. 2(7) of Interest-tax Act and, therefore, it was held that Interest-tax Act will not apply to interest received by assessee-bank on securities/debentures under category "permanent". In case of Baidyanath Plastic Industries (P) Ltd. (supra), Delhi High Court considering case with reference to ss. 276E and 269T has held that since legislature specifically used word "deposit" in contradistinction to term "loan", provisions would only be attracted if repayment has been made in respect of deposit. meaning of word "deposit" occurring in s. 269T cannot be stretched to include loan. distinction between loan and deposit is that in case of former, it is ordinarily duty of debtor to seek out creditor and to repay money according to agreement and in case of latter it is generally duty of depositor to go to banker or to depositee, as case may be, and make demand for it. While arts. 19 and 21 of Limitation Act, fix period within which suit for recovery of loan can be filed, art. 22 deals with period of limitation for suits for money on account of deposit. In case of A.M. Shamsudeen (supra) again, in connection with provisions of ss. 269SS, 269T and 271E, Madras High Court held that mere presence of some attributes of loan transaction in deposit would not be sufficient to regard loan as deposit. They are two transactions in commercial world and by interpreting and expanding scope of term "deposit" in s. 269T, it is impermissible to enlarge concept and take in concept of loan transaction also within meaning of s. 269T. submission of learned counsel of Revenue that expression "deposit" is widely defined under s. 269T and it would include loan was not accepted. In case of Life Insurance Corpn. of India vs. Jt. Commr. of Interest- tax (2002) 74 TTJ (Mumbai) 624: (2002) 82 ITD 749 (Mumbai), Mumbai Bench of Tribunal in context of term "interest" used in s. 2(7) of Interest-tax Act it was held that interest-tax has to be levied only on loans and advances and not on investment as whole and in that context investment in debentures, bonds and Government securities was held to be outside scope of s. 2(7) of Act. When person deposits money in bank, debtor- creditor relationship is created, but transaction cannot be regarded as loan and simply because debtor-creditor relationship is created, it cannot be regarded as loan transaction. It was further observed that when term "means" is used while defining expression, it gives hard-and-fast meaning of expression defined. Thus, term "interest" means interest only on loan segment of investment and leaves out other segments of investments. Tribunal held that term "advance" has many meanings but for our purpose, it only means advances which are in nature of loan. In para 46, Tribunal observed as under: "44. In light of above discussion, let us consider definition of term interest given in Interest-tax Act. Primarily, term interest is meant to be interest on loans and advances. But definition does not stop here. It goes on to include two more items. two items are commitment charges on unutilized portion of credit and discount on promissory notes and bills of exchange. As per natural import of term interest , but for specific inclusion, these would not have been considered as interest. It is perceived that, though by nature as well as nomenclature, two items may not strictly be regarded as interest, but they have some hue of interest and hence meaning of term interest is extended to include these two items. But extension has to stop here only and cannot go further. There may be some other items also which, though strictly may not be interest, but may be having some characteristics of interest. However, considering meaning of expression means and includes as explained by above two decisions of Supreme Court, no more items can be included in definition except two specifically included by legislature." Delhi Bench of Tribunal in case of Oriental Insurance Co. Ltd. (supra) observed in context of s. 5 of Interest-tax Act as under: "13. In view of above discussion, we are of considered view that although terms loans and deposits are not mutually exclusive yet, they are not same thing. most distinguishing feature which is relevant for resolving controversy before us is that in case of loan, needy person approaches lender for seeking loan at terms of lender while in case of deposit, it is depositor, who goes to depositee for investing his money primarily with intention to earn interest. That is why Hon ble Supreme Court held in case of Ram Ratan Gupta (supra) that deposit even in current account with bank did not amount to loan. In view of such distinction, we are of view that interest on deposits would not fall within ambit of expression chargeable interest appearing in s. 5 of Act." Ahmedabad Bench of Tribunal relying upon decision of Delhi Tribunal in Oriental Insurance Co. Ltd. (supra) directed AO to exclude interest earned by assessee on deposits made with financial institutions while computing total chargeable income under Interest-tax Act. It had quoted following observations from decision of Tribunal in case of Oriental Insurance Co. Ltd. (supra): "In view of above provisions, case of Revenue is that deposits with banks and other institutions would fall within ambit of word loans . While case of assessee is that loans and deposits are different expressions having different meanings and, therefore, interest on deposits is not chargeable to tax. Our study reveals that loans and deposits are not mutually exclusive terms inasmuch as (i) both are debts repayable; (ii) in both cases, money passes from one hand to another; (iii) in both cases, there is relationship of debtor and creditor; (iv) there is liability to return money depending upon terms and conditions between parties. Still there is fine distinction between two. In case of deposit, it is made at instance of depositor whereas loan is given at instance of borrower for his use with or without compensation. Consequently, deposit is repayable only on demand by depositor without debtor having to seek out creditor, while in case of loan, obligation to repay is forthwith incurred (though obligation may have to be discharged in future) and borrower must seek out lender to repay loan. Even legislature has made distinction between these two terms. Limitation Act prescribes different period of limitation, i.e., three years from date when loan is made while in case of deposit, it is three years from date when demand is made. Even IT Act, 1961 has made distinction between these two terms. Sec. 269SS prohibits acceptance of loan or deposit in cash exceeding prescribed limit. Sec. 269T prohibits repayment of deposit in cash exceeding prescribed limit. It is apparent from these provisions that repayment of loan in cash is not prohibited. Consequently, no penalty is leviable under s. 27IE where repayment of loan is made in cash. On other hand, penalty is leviable under s. 27IE if deposit is repaid in cash exceeding prescribed limit. Thus, it is apparent from these provisions that even legislature recognizes distinction between loan and deposit." It has also referred to decision of Mumbai (Delhi) Bench of Tribunal in case of Oriental Insurance Co. (supra) and earlier decision of Delhi Tribunal in case of Punjab National Bank vs. Dy. CIT (2003) 79 TTJ (Del) 454: (2003) 87 ITD 11 (Del) wherein Tribunal has pointed out disparity in expression "loans and deposits" while discussing differential meaning of term "loans and deposits". Mumbai Tribunal in case of Bajaj Auto Holdings Ltd. (supra) however, observed with regard to assessability of interest on deposit under Interest-tax Act as under making distinction of judgment of Bombay High Court in case of Pennwalt (India) Ltd. (supra) by stating that while interpreting s. 2(7) of Interest-tax Act ratio of Bombay High Court decision would not be applied and ambit and scope of term interest has to be independently determined. Similar would be position with regard to cases which arise under ss. 269SS and 269T of Act. relevant observations are: "9. definition of word interest , as contained under s. 2(7), has been already reproduced above. For purposes of Interest-tax Act, interest means interest on loans and advances made in India. definition further goes to say that it includes certain items, but, does not include certain other items. There is no other provision in Interest-tax Act which refers to deposit in contradistinction to loan or advance . Interest on deposit is not specifically excluded from definition under s. 2(7). Interest on loans as well as advance is chargeable to interest-tax. word advance has wide connotations and it means any money advanced to any person. In present case, assessee-company had advanced moneys by way of interest earning deposits, to other companies for fixed term on which interest income is earned. Such deposits have not been made in response to any invitation to make such deposits by other companies. transactions have been finalised through brokers. object and purpose of Interest-tax Act is to levy tax on interest income earned on loans and advances. Even Bombay High Court has observed that in certain circumstances loan may include deposit and deposit may include loan. It has also been observed that term loan is generic term which includes deposit also. Further, scope of definition under s. 2(7) is also enlarged as it includes interest not only on loans, but also on advances. There is no specific provision in Interest-tax Act, which grants exemption in respect of interest on inter-corporate deposits. Considering entire facts and circumstances and provisions of law, we hold that interest-tax is leviable on interest income earned by assessee- company from inter-corporate deposits. CIT(A) has already directed AO to exclude interest for period up to 30th Sept., 1991. Therefore, on this issue, finding of learned CIT(A) is confirmed." Delhi case which has been followed by Ahmedabad Tribunal has proceeded on footing that there is distinction between loan and deposit. Mumbai Bench, on other hand, proceeded on footing that deposit would be advance and would be includible in term "interest on deposit and advance". Mumbai Bench was more persuaded by reason that interest on deposit is not excluded from definition of interest and term "interest on loans and advances" is wide enough to include same. They have, however, not considered what is advance and as to whether amended definition of "interest" under Act was exhaustive or inclusive. We may refer to term advance as understood in commercial words and as stated under title "What is advance" in following words: "It was held in K.M. Mohammed Abdul Kadir Rowther vs. S. Muthiah Chettiar (1960) 2 Mad. LJ 13 at 15 that advance means literally payment beforehand; in certain cases it may be loan but it cannot be said that sum paid by way of advance is necessarily loan. In Raja of Venkatagiri vs. Krishnayya Rao Bahadur AIR 1948 PC 150 at p. 155, it was observed that ordinarily advance does not connote any idea of repayment. It is, therefore, clear that word advance used in s. 296 means advance in nature of loan and not merely advance as is understood in common parlance in sense of payment of money beforehand and which is likely to become due at some future time." It may be stated here that s. 296 of Companies Act provides for applicability of s. 295 regulating loans to directors for book debt which is in nature of loans or advances from its inception. term "loans and advances" should be understood conjointly and not in isolation. If so read, advances which are in nature of loan alone should be covered in term. As observed by Madras High Court and Privy Council decisions aforesaid, advances may in certain circumstances be loan but not necessarily always. Ordinarily advance is payment beforehand and it does not connote idea of repayment. It is adjusted when action for which money is advanced is completed and if not repaid on expiry of loan like deposit. company is not bound to accept deposit made, if proceeding on basis of prospectus person interested to make deposit. By issuing prospectus company invites offer for making deposit and that is not offer to receive deposit whereas in case of loan assessee prays for loan. It offers to borrow money and once that offer is accepted, lender is bound to give money to borrower on terms settled. It is also to be noticed that taxing statute has to be strictly construed and subject cannot be taxed unless comes within letter of law. argument that particular income falls within spirit of law cannot be availed of by Revenue. It is trite law that no tax can be imposed on subject without words in Act. No tax can be imposed by inference or analogy. cardinal principle of interpretation of fiscal law is that it should be considered strictly is long standing principle which is reiterated by Supreme Court in case of Federation of Andhra Pradesh Chambers of Commerce & Industry vs. State of AP (2001) 165 CTR (SC) 672: (2001) 247 ITR 36 (SC) and CIT vs. Kasturi & Sons Ltd. (1999) 153 CTR (SC) 1: (1999) 237 ITR 24 (SC). So long as provision is free from ambiguities there could be no need to draw analogy and unless language of provision is clear tax liability cannot be fastened upon person. In case of Sahara India Savings & Investment Corpn. (supra), Allahabad High Court discussed rule of interpretation while discussing s. 2(7) of Act observed as under: "We do not agree. It is well-settled principle of interpretation of taxing statutes that while interpreting taxing statute we have only to see words used in statute and not intention or spirit of statutory provision. In taxing statute, literal rule of interpretation applies, and it is, well settled that if transaction comes within letter of law it has to be taxed, however great hardship, but if it does not, it cannot be taxed, however great loss may be to public exchequer. This view was best expressed by Lord Cairns in Partington vs. Attorney General (1869) 4 LR 100 (HL) as follows: If person sought to be taxed, comes within letter of law he must be taxed, however great hardship may appear to judicial mind to be. On other hand if Court seeking to recover tax, cannot bring subject within letter of law, subject is free, however, apparently within spirit of law case might otherwise appear to be. principle of strict interpretation of taxing statutes was best enunciated by Rowlatt, J., in his classic statement: In taxing statute one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One must only look fairly at language used. In A.V. Fernandez vs. State of Kerala (1957) 8 STC 561 (SC): AIR 1957 SC 657, Supreme Court of India stated principle as follows (p. 661 of AIR 1957 SC): If Revenue satisfies Court that case falls strictly within provisions of law, subject can be taxed. If, on other hand, case is not covered within four corners of provisions of taxing statute no tax can be imposed by inference or by analogy or by trying to probe into intentions of legislature and by considering what was substance of matter. Where language of provision is plain, Courts cannot ordinarily concern themselves with policy behind provision, or intention of legislature. As Lord Watson said in A. Salomon vs. A. Salomon & Co. (1897) AC 22, 38 (HL) " intention of legislature is common but slippery phrase". In ITO vs. T.S. Devinatha Nadar (1968) 68 ITR 252 (SC): AIR 1968 SC 623, Supreme Court of India observed that: we must look to general scope and purview of statute, and at remedy sought to be applied, and consider what was former State of law, and what it was that legislature contemplated was made while construing non-taxing statute. said rule had only limited application in interpreting taxing statute. It follows from this decision that mischief rule laid down in Heydon s case (1584) 3 Co. Rep. 7 has only limited application to taxing statutes. Hence there is no question of looking into legislative intent or spirit of law in taxing statute. We have only to see actual words used. In other words, in taxing statute we have to go by letter of law, and not its spirit or intent. new definition of word interest in s. 2(7) is in two parts. Firstly, it says that interest means interest on loans and advances. Secondly, it includes two other items in definition of word interest . In our opinion, only correct interpretation of this provision can be that firstly nothing is interest except interest on loans and advances. Secondly, two other categories are also included in definition of word interest as specified in cls. (a) and (b) of s. 2(7). In our opinion, word means can only have one meaning, that is, it is exclusive definition vide P. Kasilingam vs. P.S.G. College of Technology (1995) Supp. 2 SCC 348. When we say that word has certain meaning then by implication we mean that it has no other meaning vide Punjab Land Development & Reclamation Corporation Ltd. vs. Presiding Officer, Labour Court (1990) 77 FJR 17: (1990) 3 SCC 682. However, when certain other categories are added then it means that only those additional categories will be included within definition and none others, vide Mahalakshmi Oil Mills vs. State of AP (1989) 1 SCC 164: (1988) 71 STC 285 (SC). Learned counsel for appellant has relied on decision of Supreme Court in Krishi Utpadan Mandi Samiti vs. Shankar Industries (1993) Supp. 3 SCC 361 (II). In that decision question came up for interpretation before Supreme Court about definition of agricultural produce in s. 2(a) of U.P. Krishi Utpadan Mandi Adhiniyam. Sec. 2(a) reads as follows: 2(a) agricultural produce means such items of produce of agriculture, horticulture, viticulture, apiculture, sericulture, pisciculture, animal husbandry or forest as are specified in Schedule, and includes admixture of two or more of such items, and also includes any such item in processed form, and further includes gur, rab, shakkar, khandsari and jaggery. Supreme Court in para 12 of its judgment has observed: It is well-settled rule of interpretation that where legislature uses words means and includes such definition is to be given wider meaning and is not exhaustive or restricted to items contained or included in such definition. Thus meaning of agricultural produce in above definition is not restricted to any products of agriculture as specified in Schedule but also includes such items which come into being in processed form and further includes such items which are called as gur, rab, shakkar, khandsari and jaggery. On strength of observation made in para 12 of above judgment, Sri Agarwal contended that word interest in s. 2(7) should be deemed to include its natural meaning and should not be limited to interest on loans and advances. We do not agree. Firstly, all that has been held by Supreme Court in case of Krishi Utpadan Mandi Samiti (supra) is that agricultural produce in s. 2(d) of U.P. Krishi Utpadan Mandi Adhiniyam will not only include items mentioned in that provision but also such items in processed form. This decision does not mean that expression "agricultural produce" can be given its natural meaning. It can only be given meaning as defined in s. 2(a), namely, that agricultural produce will only mean items mentioned in s. 2(a) of Mandi Adhiniyam and also such items in processed forms, but it obviously does not mean that other items which are not mentioned in s. 2(a) will also be deemed to be included. This decision therefore does not help appellant in any way. Sri Agarwal then relied on decision of Supreme Court in Regional Director, Employees State Insurance Corporation vs. High Land Coffee Works of P.F.X. Saldanha & Sons (1991) 79 FJR 281: (1991) 3 SCC 617. In our opinion that decision too has no relevance to present case as Supreme Court there was considering definition of words "seasonal factory" in s. 2(12) of Employees State Insurance Act. expression "seasonal factory" is defined in s. 2(12) to mean factory which is exclusively engaged in one or more of certain manufacturing processes (cotton ginning, cotton or jute processing, etc.) or any manufacturing process which is incidental to or connected with any of aforesaid processes, and includes factory which is engaged for period of not exceeding seven months in year (a) in any process of blending, packing or repacking of tea or coffee; or (b) in such other manufacturing process as Central Government may, by notification in Official Gazette, specify. Supreme Court observed that word "includes" in above definition is used to enlarge meaning of preceding words and it is by way of extension, and not for restriction. In fact this is precisely meaning, which we are giving to word "interest" in s. 2(7) of Interest-tax Act. word "includes" used there also enlarges meaning of preceding words, that is to say, word "interest" means interest by way of loans and advances, and two other items also. However, enlargement of definition is only to extent mentioned in definition itself, and no further. Hence we do not agree with submission of learned counsel for appellant that natural meaning of word "interest" must be given to it. It may be mentioned that legal fictions are well known in law. statute often defines something, which is different from meaning, which it has in common parlance. For example, s. 43(3) of IT Act defines plant to include books. Ordinarily plant means factory, and no one in common parlance regards book as factory. However, in IT Act book is treated as factory for purpose of depreciation under s. 32. large number of such other instances of legal fictions can be given. It is open to legislature to define words and, if legislature has defined it, we cannot go by meaning in common parlance or what may be called as its "natural meaning". We have to strictly abide by meaning given to it by legislature, as in present case. new definition of s. 2(7) defines interest only to mean interest on loans and advances. No doubt two other categories have also been included, i.e., commitment charges on unutilized portion of any credit sanctioned for being availed of in India, and discount on promissory notes and bills of exchange drawn or made in India. We are not concerned with these two additional categories in present case. Hence, in our opinion, "interest" in new s. 2(7) only means interest on loans and advances, and we cannot give it extended meaning as contended by learned counsel for appellant." In view of above rules of interpretation of taxing statute which will be strictly applied, interest on inter-corporate deposits unless they clearly fall within meaning of "interest on loans and advances" would not be taxable. We accordingly hold that inter-corporate deposit can neither be loan nor advance. We, therefore, following aforesaid decision of Ahmedabad Bench of Tribunal, direct AO to exclude interest on inter-corporate deposit from assessment of assessee. Consequently, levy of penalty made would also not stand. They are, accordingly, deleted. In result, all appeals of assessee are allowed. *** UTKARSH FINCAP (P) LTD. v. INCOME TAX OFFICER