Judgment Nazir Ahmad, J. 1. A statement of the case has been submitted by the Income-tax Appellate Tribunal, Patna Bench A, Patna, under Sec.256(1) of the Income-tax Act, 1961 (hereinafter to be referred to as "the Act"), referring the following questions of law for the opinion of this court : "1, Whether, on the facts and in the circumstances of the case, the provision of Sec. 40(c) could be applied to the old creditors who were related to the directors of the company ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the interest so paid to the above creditors was not an expenditure within the meaning of Sec. 40(c) ?" 2. The relevant facts of the case can be culled out from the statement of the case. The assessee-company paid a total amount of Rs. 47,783 as interest to its creditors. Out of this amount, a sum of Rs. 33,297 was paid to the relations of the directors or their associates. The deposits in the names of the relations of the directors or the associates was old and the interest so paid was being allowed by the Income-tax Officer in the past. In the assessment year 1971-72, the Income-tax Officer, taking note of the provisions of Sec. 40(c) of the Act, held that the sum of Rs. 33,297 was not allowable in the hands of the company. A copy of the assessment order of the Income-tax Officer has been annexed and marked as annexure-A forming part of the statement of the case. 3. The assessee appealed before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner found that the interest payment of Rs. 47,788 related partly to individuals and partly to institutional creditors and allowing the interest paid to the institutional creditors, the rest of the payment relating to the directors, their relatives and associates amounting to Rs. 33,297 was disallowed by the Income-tax Officer. The Appellate Assistant Commissioner held that the reasoning given by the Income-tax Officer is incorrect and the application of Sec. 40(c) in this case is also incorrect. The Appellate Assistant Commissioner, therefore, deleted the addition of Rs. 33,297. He also pointed that no such disallowance was made by the Income-tax Officer for the assessment year 1972-73 and also in the earlier assessment years. The Appellate Assistant Commissioner, therefore, deleted the addition of Rs. 33,297. He also pointed that no such disallowance was made by the Income-tax Officer for the assessment year 1972-73 and also in the earlier assessment years. A copy of the order of the Appellate Assistant Commissioner has been annexed and marked as annexure-B forming part of the statement of the case. 4. Being aggrieved by the order of the Appellate Assistant Commissioner, the Department came in appeal t;o the Tribunal and it was contended on behalf of the Department that in view of Sec. 40(c) of the Act, the interest paid to the relations of the directors were not allowable in the hands of the company. It was also submitted that the company had liquid cash and there was no need for the assessee-company to borrow money on interest and, therefore, payment of interest was an attempt to reduce the profits. The Tribunal held that Section 40(c) of the Act deals with an expenditure which results directly or indirectly in the provision of any remuneration or benefit or amenity to a relative of the director or such person, as the case may be. The Tribunal held that the interest paid on the deposits is not remuneration as remuneration is paid by an employer to an employee, and so the interest paid to such a relation cannot be taken as remuneration. The Tribunal also took the view that the benefit within the meaning of Sec. 40(c) of the Act is also a benefit which is normally enjoyed by an employee of (he company and a creditor of the company is not an employee and so is the case with amenity. The Tribunal also held that normaly interest paid by the company is an expenditure of the company but it is not expenditure within the meaning of Sec. 40(c) of the Act, as it is not expenditure for which there is a provision. The Tribunal also held that normaly interest paid by the company is an expenditure of the company but it is not expenditure within the meaning of Sec. 40(c) of the Act, as it is not expenditure for which there is a provision. The Tribunal also held that under Sec. 40(c) of the Act, the expenditure is that expenditure which is incurred by the company on its director or relations in the shape of remuneration, benefits and amenities and that the expenditure under Sec. 40(c) is directly or indirectly relatable to the service rendered by the employee and the interest paid to the creditors of the company is not relatable to any service rendered by the creditors of the company and that the interest paid on the deposits is a pure and simple interest and it is not an expenditure within the meaning of Sec. 40(c) of the Act. The Tribunal also rejected the arguments made on behalf of the Department that in view of the liquid cash with the company, the deposits should have been returned to the creditors which could have reduced the interest payable. The Tribunal held that it is for the company to see how it runs its financial affairs and the Revenue cannot be permitted to play the role of a. guide, philosopher or controller of financial affairs of the company. The Tribunal also held that it is for the businessman to run the business to the best of. his capacity and in the manner he likes best. The Tribunal also held that a businessman would like to get any amount of money for the benefit of use in his own business and if he chooses to keep the money on such terms as the lender may agree, it has to be left entirely to the business acumen of the businessman. The Tribunal, therefore, confirmed the order of the Appellate Assistant Commissioner. A copy of the order of the Appellate Tribunal has been annexed and marked as annexure-C forming part of the statement of the case. 5. Mr. The Tribunal, therefore, confirmed the order of the Appellate Assistant Commissioner. A copy of the order of the Appellate Tribunal has been annexed and marked as annexure-C forming part of the statement of the case. 5. Mr. B. P. Rajgarhia has referred to Sec. 40(c)(i) of the Act which lays down that notwithstanding anything to the contrary in Sections 30 to 39, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession", in the case of any company- "(i) any expenditure which results directly or indirectly in the provision of any remuneration or benefit or amenity to a director or to a person who has a substantial interest in the company or to a relative of the director or of such person, as the case may be ; if in the opinion of the Income-tax Officer any such expenditure or allowance as is mentioned in Sub-clauses (i) and (ii) is excessive or unreasonable having regard to the legitimate business needs of the company and the benefit derived by or accruing to it therefrom". Mr. B. P. Rajgarhia has not argued on the question of remuneration or amenity. He laid stress on the point that the payment of interest on the loan is a benefit to the person in whose name the (sic) have been made. 6 The assessment order of the Income-tax Officer, at page 2 shows that the assessee-company had taken loans from the Bihar State Finance Corporation, State Bank of India, Ranchi, and M/s. General Electric and interest we paid on those amounts which was allowed by the Income-tax Officer. However, he found that the loans were also taken from relations of the directors or their sociates on which interest to the extent of Rs. 33,297 was paid. The Income-tax, officer has also pointed out that the majority of the loans are old and only shall amount of loan was taken afresh in the year of account relating to the assesment year 1971-72. The interest rate paid has not been held to be excessive by the income-tax Officer. He only considered whether the loans were for legislate business needs and if the loans were not for legitimate business needs, their the payment of interest will be unreasonable. The interest rate paid has not been held to be excessive by the income-tax Officer. He only considered whether the loans were for legislate business needs and if the loans were not for legitimate business needs, their the payment of interest will be unreasonable. The Income-tax Officer found that the assessee-company had taken loans since long on which interests are being aid sing long irrespective of the fact whether the needs of the company justified the loan year after year since the parties are either directors or their relatives, firms in which directors are directly interested and the amounts are standing the books of the company. The Income-tax Officer held that the legitimate needs of the business have not been taken into account and family deposits have been kept in the business for earning interest. The Appellate Assistant Commoner has clearly pointed out that no such disallowance was made by the Income-tax Officer in the assessment year 1972-73. The Income-tax Officer has himself admitted that such interests were allowed in the past and only in the assessmeiwear 1971-72, the interest was disallowed. 7. Mr. B. P. Rajgarhia, for the Revenue, has relied on the case of Board of Directors of the South Arcot Electricity Distribution Company Ltd. V/s. K. Mohammad Khan, AIR 1963 Mad 192 , where it has been held in paragraph 11 that the word benefit used in Sub-section (2) means "an advantage" and will obviously include monetary as well as non-monetary one. This decision is not in relation to Sec. 40(c) of the Act. 8. It cannot be doubted that benefit means an advantage and will include a monetary as well as non-monetary one. But there the question is whether benefit in Sec. 40(c)(i) of the Act refers to the expenditure relating to the interest. The Tribunal has elaborately discussed the contentions raised on behalf of the Revenue and has come to a finding that Sec. 40(c) will not be applicable to the interest payments on deposits to the director, his relations or associates and that the words "remuneration or benefit or amenity" are not applicable to the expenditure on interest payment on the deposits made by the director, his relations or associates. The Tribunal has also fully discussed that the loans taken by the assessee-company cannot be said to be not for legitimate business needs. The Tribunal has also fully discussed that the loans taken by the assessee-company cannot be said to be not for legitimate business needs. The very circumstance that the assessee-company had to take loans from the Bihar State Finance Corporation, State Bank of India, Bank of India and M/s. General Electric clearly goes to show that the company was in need of money and so the assessee-company had to borrow money. The bank rate of interest was very high and it has not been pointed out that a higher rate of interest was paid by the assessee-company on the deposits made by the directors, their relations and their associates. 9. It appears that in Sec. 40(b) of the Act, the Income-tax Officer can disallow in the case of any firm, any payment of interest, salary, bonus, commission or remuneration made by the firm to any partner of the firm, Thus, in Section 40(b) of the Act interest has been clearly mentioned. If the intention of the Legislature had been that the interest payment on deposits should also be covered by Sec. 40(c)(i), then the Legislature must have clearly mentioned the interest on deposits in Sec. 40(c)(i). 10. Mr. B. P. Rajgarhia has invited our attention to Sec.36 (1) (iii) of the Act which lays down that the amount of the interest paid in respect of capital borrowed for the purpose of the business or profession should be allowed as a deduction in computing the income referred to in Sec.28 of the Act. It only goes to show that the interest paid in respect of the capital borrowed for the purpose of business or profession is allowable expenditure. Once it is held that the assessee-company took loans for the purpose of business, the interest has to be allowed and it cannot be said that the interest on borrowed money is an amenity or benefit or remuneration. 11. I, therefore, hold that the Appellate Tribunal has given cogent reasons for coming to a finding that the interest paid on the deposits by the directors, their relations and associates is not an expenditure within the meaning of Section 40(c) of the Act. 12. 11. I, therefore, hold that the Appellate Tribunal has given cogent reasons for coming to a finding that the interest paid on the deposits by the directors, their relations and associates is not an expenditure within the meaning of Section 40(c) of the Act. 12. In view of my discussions above, I hold that, on the facts and in the circumstances of the case, the provisions of Sec. 40(c) of the Act could not be applied to the old credits on which interest had been paid to the creditors who were related to the directors of the company and, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the interest so paid to the above creditors was not an expsnditure within the meaning of Sec. 40(c) of the Act. Hence, question No. 1 is answered in the negative and against the Revenue and question No. 2 is answered in the affirmative and against the Revenue and thus both the questions are answered in favour of the assessee. However, in the circumstances of the case, the parties will bear their own costs. S.K.Jha, J. 13 I agree.