TMI Blog2015 (11) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... fits/perquisites and this provision is not applicable in the case of partnership firm such as AHS. We are unable to see any infirmity or perversity or any other valid reason to interfere with the order of the first appellate authority and we uphold the same. - Decided against revenue. - I.T.A. No. 6204/Del/2013, Cross Objection No. 230/Del/2015 - - - Dated:- 23-9-2015 - Shri Chandra Mohan Garg, Judicial Member And Shri L. P. Sahu, Accountant Member For the Appellant : Shri Amrit Goel, CA For the Respondent : Shri Ravi Jain, CIT (DR) ORDER Per Chandra Mohan Garg, Judicial Member This appeal by the Revenue has been directed against the order of the Commissioner of Income Tax (Appeals)-I, New Delhi, dated 18/09/2013 in appeal no. 134/2013-14 for A.Y. 2010-11. Ground no. 1 3 of the Revenue are of general in nature which needs no adjudication. The remaining sole ground no. 2 reads as under: 2. On the facts and circumstances of the case the ld. CIT(A) has erred in law in deleting the addition of ₹ 2,28,27,650/- made by the AO on account of benefit/perquisite u/s 2(24)(iv) of the Income Tax Act, 1961. 2. Briefly stated the facts giving ris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Shri Shiv Sharma were availing being their position as a substantive shareholders of M/s AIPL. The ld. DR vehemently contended that the AO took a very balancing approach by taking rate of interest @ 6% p.a. and the total interest was computed at ₹ 3,01,58,645/- out of which ₹ 1,94,21,420/- pertains to assessee and the same amount was rightly taxed in the hands of the assessee as the benefit/perquisite received by the Directors to be taxed as income u/s 2(24)(iv) of the Act. 6. The ld. DR strongly contended that the CIT(A) granted relief to the assessee without any justified reason because the said loan payment were de-facto made by UHCPL but only rooted through M/s AHS Joint Venture to the assessee. The ld. DR lastly prayed that the impugned order may be set aside by restoring that of the AO. 7. Replying to the above, the ld. Authorized Representative (AR) supported the order of the first appellate authority and submitted that the case of the assessee is squarely covered in favour of the assessee by the order of the Hon ble High Court of Punjab Haryana in the case of CIT vs. Madhu Gupta reported as (2012) 205 Taxman 303 (P H), wherein it was categorically he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... real income. The AO has himself recognized the additions as on account of notional income. The question which needs to be asked is as to why the AO has estimated the alleged interest income @6% p.a. or not at 5% of 10% or any other rate, for that matter? The very fact that the AO has gone into estimation, assumption and presumption establish that there is no real income and it is only the hypothetical income added by AO. The Hon ble Apex Court in the case of Godhra Electricity Co. Ltd. (1997) 225 ITR 746 (SC) held that the computation of income is made in accordance with the method of accounting regularly employed by the assessee which may be cash system or mercantile system; however, in both cases unless there is real income, there cannot be any income tax. The aforesaid proposition with regard to real income theory was reaffirmed by Apex Court in the case of CIT vs. Sujata vs. Manohar and G.B. Pattanaik (1999) 236 ITR 315 (SC). 2. There is no involvement of any Benefit or Perquisite given by company to the assessee. Similarly there is no payment for any obligation of the appellant by the company. There is no agreement or contract between the company and the assessee rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Section 28(iv) can be invoked only where the benefit or perquisite is other than the cash. Value of a thing would be the amount of money that it is worth. Valueless is what is worthless. In Installment Supply (P) Ltd. vs. CIT [1984] 149 ITR 457, this Court examined the term whether convertible into money or not as appearing in section 40(a)(v) of the Act when the following question of law had been referred to it for decision for the A.Y. 1969-70 and 1970-71: Whether, on the facts and in the circumstances and on a true interpretation of section 40(a)(v) of the Income-tax Act, 1961, reimbursement of the medical expenses to the managing director has been correctly restricted by the Tribunal to ₹ 12,000 for each of the assessment years 1969-70 and 1970-71? This Court held that use of the words whether convertible into money or not goes to show that the term benefit or amenity or perquisite cannot relate to cash payments. In CIT vs. Alchemic (P) Ltd. [1981] 130 ITR 168 (Guj.), the term benefit or perquisite arising from business as appearing in section 28(iv) fell for consideration. The Court held that if what was received either by way of benefit or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. 4. With regard to addition of ₹ 3406230/- in respect of advances received from AHS Joint Venture, the AO has ignored the basic provisions of section 2(24)(iv) of the Income Tax Act, 1961. The amount of ₹ 3406230/- added by AO as 6% interest is on ₹ 56770500/- which has been received from AHS Joint Venture. M/s AHS Joint Venture is not even a company. Thus, there is no applicability at all of the provisions of section 2(24)(iv) to the transaction with AHS Joint Venture. With regard to observation of AO that amount advanced by AHS Joint Venture in a de-facto payment by Ultra Home Construction P. Ltd., it is submitted that firstly, there is no nexus established by the AO between the amount received by AHS Joint Venture from Ultra Home Construction P. Ltd. and the amount granted by AHS Joint Venture to the assessee. Moreover, under any circumstances, no adverse inference can be drawn in the hand of the appellant even if AHS Joint Venture had received any amount from Ultra Home Construction. AHS Joint Venture and Ultra Home are separate independent entities and they have their own transactions between them. The AO has himself assessed AHS Joint Venture and m/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that there is no payment by M/s Ultra Home Construction P. ltd. (UHC) to AHS which can be linked even remotely to the said advance. Therefore, the averment of the revenue that the advance originated from UHC has no factual basis. It is further noted that the provisions of section 2(24)(iv) are not applicable in the case of partnership firm but are applicable only in the case of companies. Thus, the provision is inapplicable in the present case. Regarding the amount of ₹ 1,94,21,420/- received from Amrapali Infrastructure P. Ltd. (AIPL), it is seen from the ledger account that there is no amount actually received but it is only a journal entry passed on 31.03.2010 debiting the appellant s account by an amount of ₹ 32,40,90,344/- (and correspondingly crediting the UHC account) to enhance the promoters contribution in the joint venture project between AIPL and UHC. This book entry was made to facilitate bank finance for the project and does not have any tax implication as such. IN these factual and legal aspects of the matter, the additions made cannot be sustained and are deleted. These grounds of appeal are allowed and appellant gets relief of ₹ 2,28,27,650/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Coming to the next limb of the issue regarding addition of ₹ 1,94,21,420/- the ld. DR pointed out para no. 6 to 6.3 of the assessment order and submitted that the interest free loan amount received by the assessee from M/s AIPL directly attracts provisions of section 2(24)(iv) of the Act because interest free advance received by the Directors should be treated as benefit/perquisite received by the director as they are person who control the affairs of the assessee company and the group companies and advancing interest free loans to themselves without charging any interest is a self serving arrangement to avoid the tax. The ld. DR supporting the action of the AO submitted that the AO by taking a balancing and conservative and reasonable estimate determined the value of the benefit by taking the rate of interest of 6% p.a. and made the addition on correct and justified basis. The ld. DR vehemently pointed out that the CIT(A) granted relief to the assessee without any basis and, therefore, impugned order may be set aside by restoring that of the AO on this issue. 14. Replying to the above, the ld. AR submitted that the assessee did not actually receive any interest free loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit of interest free loan, as deemed income, the same would not have been incorporated by way of amendment and subsequent repealed. In the aforesaid case, the assessee was in appeal aggrieved against the judgment of Karnataka High Court, wherein reliance was placed upon judgments of Madras High Court, as mentioned above. The Hon ble Supreme Court has also quoted with approval, the passage from the judgment of P.R.S. Oberoi s case (supra). It observed: The amendment made by the 1984 Amending Act was both to Section 17(2) and Section 40A(5). In the impugned judgment reference in fact had been made to inclusion of Sub Clause (vi) in Clause (2) of section 17. Moreover, the High Court in the impugned judgment did not consider the amendments made by the Amending Act, 1984 on the ground it is difficult to see how this amendment can have any bearing upon the interpretation of the then existing provisions of the Act. We do not think this approach was also correct. An amending provision can certainly give guidance to interpretation of the existing provisions. The judgments of the Madras High Court which were relied upon by the High Court in the impugned judgment were for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.4.1985 by the Finance Act, 1985, as a measure of relief to the salaried taxpayers, and the circular dated 12.6.1985 of CBDT relating thereto, the interest not charged could not be treated as assessees income u/s 2(24)(iv) of the Act. The relevant operative part of the order of the Hon ble High Court at page 332-333 is being respectfully reproduced as follows: The apex court had an occasion to consider a similar questin in V.M. Salgaocar and Bros. Pvt. Ltd. vs. CIT [2000] 243 ITR 383. It was, inter alia, held as follows (headnote): Sections 17(2) and 40A of the Income Tax Act, 1961, were amended by the Taxation Laws (Amendment) Act, 1984. Sub-clause (vi) of clause (2) of sectin 17 of the Act, as inserted by the Amendment Act of 1984, provided that where the employer has advanced any loan to the employee and either no interest is charged by the employer on the amount of such loan or interest is charged at a rate lower than the rate of interest which the Central Government may specify, then, (a) where the loan is advanced without charging any interest, the interest calculated in the prescribed manner on such loan at the rate so specified, and (b) where the loan is advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs contribution in the Joint Venture object between AIPL and UHCPL. Hence, estimated notional addition made by the AO u/s 2(24)(iv) of the Act on both the count could not be held as sustainable and the same was rightly deleted by the CIT(A). The said conclusion also gets support and strength from the ratio of the order of Hon ble Jurisdictional High Court of Delhi in the case of Sohan Singh vs. CIT (supra). We also hold that the interest free advance/loan to assessee from AHS also does not attract provisions of section 2(24)(iv) of the Act because this provision is only applicable to the cases wherein a company provides benefits/perquisites and this provision is not applicable in the case of partnership firm such as AHS. We are unable to see any infirmity or perversity or any other valid reason to interfere with the order of the first appellate authority and we uphold the same. Accordingly sole ground of the Revenue being devoid of merits on both the limbs of the issue is dismissed. 19. Cross Objection No. 230/D/2015: The ld. AR of the assessee filed an application and submitted that the assessee wishes to withdraw the cross objection and the assessee may kindly be allowed to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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