Judgment :- Usha, J. Reference made by the Income Tax appellate Tribunal (Cochin bench) is at the instance of assessee. Relevant assessment year is 1982-'83. Following questions are referred for the opinion of this Court: 1) Whether on the facts and in the circumstances of the case the appellate Tribunal was justified in confirming the disallowance of interest on deposits received from shareholders and directors under S.40A (8) of the Act? 2) Whether the appellate Tribunal was correct in invoking S.40A(8) of the I.T. Act, 1961 to deposits from directors and shareholders especially in view of the legislative background and the provisions of the Companies Acceptance of Deposit Rules, 1975? 3) Was the appellate Tribunal right in ignoring the principle of, 'pan materia' while interpreting the words deposits in S.40A(8) of the I.T. Act with reference to that word in the Companies Acceptance of Deposit Rules, 1975? 4) Whether the Tribunal was justified in not applying the notification GSR 50E dated 1.2.1977, which exempted small scale industries, to the applicant? The assessee, a private limited company, doing business in paper, board, printers etc. was accepting loans from directors, shareholders and outsiders. Along with its returns the assessee filed adjustment statement disallowing 15% of interest on deposits from outside loans, but the loans from directors and shareholders were treated as exempted deposits. While completing the assessment, the Income-tax Officer rejected the above claim and disallowed 15% of interest paid to the directors and shareholders also. On appeal, the CIT (Appeals) as well as Income Tax appellate Tribunal (Cochin bench) did not accept assessees contention. 2. Sub-s.(8) of S.40A of the Income-tax Act, as it stood during the relevant time reads as follows: "Where the assessee, being a company (other than a Banking Company or a Financial Company), incurs any expenditure by way of interest in respect of any deposit received by it, fifteen per cent, of such expenditure shall not be allowed as a deduction." Explanation to the above sub-section defined "deposit" as any deposit of money with, and includes any money borrowed by, a company, but exempted amounts received by the company from certain sources. The loan taken from its directors and shareholders were not included in the exempted category. The loan taken from its directors and shareholders were not included in the exempted category. It was conceded by the learned counsel appearing on behalf of the assessee that on a plain reading of the section it cannot be taken that the provisions of sub-s.(8) would not be applicable to loan from the directors and shareholders. But the learned counsel invited us to look in to the provisions contained under the Companies Acceptance of Deposits Rules, 1975, which came into force on 8.2.1975 along with its amendment by adding clause (9) in the definition of the term "deposit" in the said rules with effect from 18.9.1975. Clause (9) excluded deposit by directors from the term'deposit'. The provisions under sub-s.8 of S.40A of the Income tax Act were brought into the statute under the Finance Bill 1975 with effect from 1.4.1976 following the amendment to the Companies Act incorporating S.58A under which Companies Acceptance of Deposits Rules, 1975 were issued. Therefore, according to the learned counsel, amendment to the provisions of Companies Acceptance of Deposits Rules, 1975 by adding clause (9) should be read into the provisions of the Income Tax Act also. The learned counsel further pointed out that a reference to the memorandum explaining the provisions in the Finance Bill 1995 would show that sub-s.(8) was introduced to check unrestricted growth of deposits in the non-banking sector from the public and not from inside. On this ground also, he submits that the deposits of the directors and share holders should be exempted from the provisions of sub-s.8 of S.40A. The learned counsel relied on a decision of Madhya Pradesh High Court in support of his contention (Commissioner of Income Tax v. Kalani Asbestos (P) Ltd., (1989) 180ITR55). 3. We find no merit in the contention raised by the assessee. S.58A was introduced in the Companies act by act 41 of 1974 with effect from 1.2.1975. The above provision was incorporated for restricting the acceptance of deposits by the Companies. Companies Acceptance of Deposits Rules, 1975 were issued by virtue of the power given under S.58A and it came into force with effect from 5.2.1975. The fact that an amendment had to be brought in Companies Acceptance of Deposit Rules, 1975 by adding Clause (9) for excluding deposits from directors, itself would show that prior to the amendment the term deposit included deposits made by the directors also. The fact that an amendment had to be brought in Companies Acceptance of Deposit Rules, 1975 by adding Clause (9) for excluding deposits from directors, itself would show that prior to the amendment the term deposit included deposits made by the directors also. So long as no such amendment is made to the provisions of the Income tax Act as in the case of Companies Acceptance of Deposits Rules 1975, we find no reason to hold that provisions contained under sub-s.(8) of S.40A of the Income Tax Act would not be applicable to deposits made by directors or shareholders. A similar view was taken by the Rajasthan High Court in Commissioner of Income Taxv. Gandhi Metals Mills (P) Ltd., (1993) 200ITR 252. The decision of the Madhya Pradesh High Court relied on by the learned counsel for the assessee is of no help to him. On the facts of the case, it is seen that the Tribunal had found that interest was not paid by the assessee in respect of any deposit received by it. 4. In the light of the above discussion, we hold that the authorities below were justified in disallowing 15% of interest paid to directors and shareholders. 5. We therefore answer the questions referred in the affirmative in favour of the Revenue and against the assessee. A copy of this judgment under the seal of the High Court and the signature of the Registrar will be forwarded to the Income tax appellate Tribunal (Cochin bench).