1.10     Query

Disclosure of a deposit given to the IDBI under Companies

Deposits (Surcharge on Income-tax) Scheme, 1976.

1.A company has shown in its balance sheet, the fixed deposit on the account of the IDBI with Bank of India in lieu of payment of surcharge on income-tax under the head ‘Bank Balances’. The interest accrued there-on has been included in the profit and loss account under the head ‘Interest from term deposit’. The company has been following this practice since the deposit was first made in financial year 1976-77.

2. According to the auditors the deposit should have been shown under ‘Loans and Advances’ in view of Part I of Schedule VI to the Companies Act, 1956 and the interest accrued on this deposit should have been shown separately as per the requirements of 3 (xi) (b) of Part II of the Schedule

                                                    Opinion                                                                August 13, 1982

 1. The Committee is of the opinion that since a separate head ‘Bank Balances’ has been provided in Part I of Schedule VI to the Companies Act, if the company has disclosed the amount and the nature of deposit under this head, it may be considered that the disclosure is appropriate.

2. In the opinion of the Committee, item 3 (xi) (b) of Part II of Schedule VI to the Companies Act, 1956 merely requires the disclosure of ‘Other income by way of interest specifying the nature of the income’. In the present case, the company appears to have clubbed the interest accrued from the deposit made on account of the IDBI, with the interest accrued from other term deposits. Since the nature of income from the deposit, irrespective of the purpose for which the deposit was made, is similar to that of other term deposits, it may be appropriate to club it with interest accrued from other term deposits.

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