2010 (10) TMI 863 - HC - Income Tax

Disallowance u/s 40(c) - whether value of perquisite arising to the director on account of interest attributable to interest free amount advanced to him should be determined by allocating the said interest in the proportion as the borrowed funds of the assessee company bear to the total funds Held that - Following the judgment of V.M. Salgaocar and Bros. (P) Ltd. (2000 (4) TMI 2 - SUPREME Court) it was held that giving of interest-free loan to any employee was not covered by the provision of disallowance under Section 40A(5) or Section 40(c) of the Income Tax Act 1961 question referred is answered against the revenue and in favour of the assessee.

Summary

The High Court of Punjab and Haryana addressed a question of law regarding the disallowance of interest on interest-free loans to a director. The court ruled in favor of the assessee, citing a previous judgment that interest-free loans to employees are not covered under relevant sections of the Income Tax Act. The matter was disposed of accordingly.