TMI Blog1993 (3) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... ally correct in upholding the applicability of the provisions of section 28(iv) of the Income-tax Act, 1961, an sustaining the inclusion of the amount of Rs. 24,885 to the income of the assessee ?" Income-tax Reference No. 299 of 1982 : (Assessee-Joginder Singh- Hindu undivided family): "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was legally correct in upholding the applicability of the provisions of section 28(iv) of the Income-tax Act and sustaining the inclusion of the amount of Rs. 51,320 to the income of the assessee ?" It was the assessees who sought reference of these questions on applications filed under section 256(1) of the Income-tax Act, 1961 (for short, "the Act"). The In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the capital account of the assessee-Hindu undivided family. The Income-tax Officer, at the stage of draft assessment order, came to a preliminary conclusion that the assessee Hindu undivided family utilised that amount of overdrawals disclosed in the capital account of the firm and utilised the same without paying any interest to the firm. The Income-tax Officer was of the opinion, therefore, that the assessee derived the abovesaid benefit by virtue of his being partner of the firm, and he, therefore, proposed application of the provisions of section 28(iv) of the Act and held that this was certainly benefit or perquisite and could arise only because the assessee-Hindu undivided family was a partner of the firm. The Income-tax Officer furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re placed on record before it. The Tribunal found that, during the previous year relevant to the assessment year in question, total credit of Rs. 24,76,000 was shown as available to the firm on which no interest need have been paid. A sum of Rs. 22,40,000 was stated to be the total of the debit balances in the accounts of the partners including the assessees and their relatives over which no interest was charged. The Tribunal agreed with the conclusion arrived at by the Commissioner of Income-tax (Appeals) who had held that the assessee had availed of the benefit of such "non-interest-bearing funds" to the extent of the debit balance in his account in the firm and so the provisions of section 28(iv) were attracted, and, if there was no such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not appear to have on our record the order of the Tribunal in the case of the firm for the assessment year 1976-77, but we do have on our record the order of the Tribunal on a reference application of the firm for the assessment year 1977-78, where the Tribunal declined to state the case on the question as to whether, on the facts and circumstances of the case, the Tribunal was correct in law in holding that the interest payment of Rs. 1,94,310 was not disallowable as for non-business purposes. We have also on our record the order of this court under section 256(2) of the Act refusing to call for any case on this question from the Tribunal. The sole basis for invoking the provisions of section 28(iv) in the case of the assessee would, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in the case of the firm that the provisions of section 28(iv) were invoked in the case of the assessee. The Tribunal, in the case of the firm, was of the view that there was no justification on the part of the Income-tax Officer for making any disallowance under section 36(1)(iii) as then on interest-bearing funds available with the firm exceeded the non-interest-bearing advances which had been given by the firm to its partners. In this view of the matter, the very basis on which the Tribunal in the present case decided against the assessee disappears. In all subsequent years, the Tribunal found that the non-interest-bearing funds available to the firm exceeded the borrowals made by its partners. The Tribunal, thus, held that the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oans. He referred to decision of the Madhya Pradesh High Court in V. P. Warrier v. CIT [1990] 181 ITR 303. In this case, the assessee was a partner in a partnership firm carrying on business and the assessee was allowed by the firm the use of its residential premises, car and telephone. The Income-tax Officer valued these perquisites at Rs. 15,000 and added the same to the income of the assessee under section 28(iv) of the Act. In appeal, the value of the perquisites was reduced to Rs. 3,600. The court held that, on the facts and in the circumstances of the case, the Tribunal was right in holding that a sum of Rs. 3,600 was includible In the income of the assessee under section 28(iv) of the Act. We do not think that this judgment is quite ..... X X X X Extracts X X X X X X X X Extracts X X X X
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