Delhi H.C : No income within the meaning of s. 2(24)(iv) is assessable in the hands of the assessee

High Court Of Delhi

CIT vs. Tara Singh

Section 2(24)(iv)

Asst. Year 1973-74, 1974-75

R.C. Lahoti & J.B. Goel, JJ.

IT Ref. Nos. 174 & 211 of 1985

2nd December, 1997

Counsel Appeared

R.D. Jolly with Ms. Premlata Bansal, for the Revenue : None, for the assessee Judgment

BY THE COURT :

This common order shall govern the disposal of two IT references, namely, IT Ref. No. 174 of 1985 and IT Ref. No. 211 of 1985 arising out of two different assessment years though in respect of the same assessee and on the same facts and law. The questions referred for the opinion of the High Court are :

Asst. yr. 1973-74 (IT Ref. No. 211 of 1985) :

“Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that no income within the meaning of s. 2(24)(iv) is assessable in the hands of the assessee ?”

Asst. yr. 1974-75 (IT Ref. No. 174 of 1985) :

“Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that no income within the meaning of s. 2(24)(iv) is assessable in the hands of the assessee ?”

2. The assessee, S. Tara Singh, is one of the directors of Green Finance India (P) Ltd. There stood a certain debit balance in the books of the company against the assessee and the ITO formed an opinion that the assessee shall be deemed to have derived benefit from the company assessable to tax within the meaning of s. 2(24)(iv) of the Act. The value of such benefit was added to the income of the assessee.

3. The AAC deleted the addition in the appeal preferred by the assessee. The Revenue went in appeal to the Tribunal which has been dismissed.

4. Learned counsel for the Revenue has relied on the Division Bench decision of the Madras High Court in Addl. CIT vs. Late A.K. Lakshmi 1978 CTR (Mad) 171 : (1978) 113 ITR 368 (Mad) : TC 58R.480. The facts of the case bear a close resemblance to the fact of the case at hand. During the course of its judgment, the Division Bench has observed : “If either due to magnanimity or with a view to help an employee any amounts are advanced by an employer to an employee without an obligation to pay any interest, we have no hagitation in coming to the conclusion that the employee would be deriving a benefit in that he gets the use of the monies belonging to the company or any other employer, without having any liability to pay interest.”

5. So is the view taken in yet another Division Bench decision of the Madras High Court in CIT vs. S.S.M. Lingappan (1980) 18 CTR (Mad) 56 : (1981) 129 ITR 597 (Mad) : TC 38R.367. In this case, the Division Bench has gone on to hold that even if the benefit has been conferred on the director unilaterally without the aid of any agreement between the parties, the benefit could be taxed as a perquisite under s. 17(2)(iii). We find ourselves in respectful agreement with the view so taken by the Madras High Court. We may, however, state that no decision to the contrary has come to our notice.

For the forgoing reasons, we are of the opinion that the Tribunal was not correct in law in holding that there was no income within the meaning of s. 2(24)(iv) assessable in the hands of the assessee.

Both the questions are answered in the negative, i.e., in favour of the Revenue and against the assessee.

[Citation : 233 ITR 669]

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