TMI Blog1989 (9) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... er consideration and Rs. 7,47,598 as at the end of the second year under consideration from the said account. He further observed that the said company did not charge any interest on the overdrawn amounts from the assessee. The Income-tax Officer held that the assessee got a benefit from the aforesaid company in the shape of getting funds without any obligation to pay interest thereon. As the assessee was a director of the aforesaid company, he invoked the provisions of section 2(24)(iv) of the Income-tax Act, 1961., and calculated a sum of Rs. 53,119 in the first year and Rs. 80,942 in the second year as the value of the aforesaid benefit being interest calculated at 12 per cent. per annum on the overdrawn amounts. He taxed the aforesaid sums under the head "Other sources". The assessee appealed to the Appellate Assistant Commissioner and contended that the action of the Income-tax Officer was not justified. It was urged that the aforesaid company did not allow the assessee to overdraw from interest-bearing funds but only from its own funds. It was further urged that, in view of a resolution dated May 27, 1968, there was a long-standing practice between the assessee and the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the relevant previous years in the form of using the company's funds without paying any interest. Our attention was then invited to the amendment made in section 17(2) and section 40A of the Income-tax Act, 1961, by the Taxation Laws (Amendment) Act, 1984. Sub-clause (vi) of clause (2) of section 17 of the Income-tax Act, 1961, as inserted by the said Amendment Act of 1984, provides that where the employer has advanced any loan to the employee for the purpose of building a house or purchasing a site or a house and site or for purchasing a motor car, 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, having regard to the rate of interest charged by it from its employees on loans for such purpose granted to them, specify in this behalf by notification in the Official Gazette, an amount calculated on the following basis will be regarded as "perquisite" received by the employee and charged to tax accordingly. (a) in a case where such loan is advanced without charging any interest, the interest calculated in the prescribed manner on such loan at the ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in section 17(2) of the Income-tax Act shall be regarded as a "perquisite" provided by the employer to his employee and, thereafter, to omit the aforesaid provision with effect from the date of its insertion by the Finance Act, 1985. It was, therefore, submitted that, without a specific provision which was sought to be introduced by sub-clause (vi) in section 17(2) of the Act and also sub clause (vi) of Explanation 2(b) to section 40A(5) of the Act, the grant of loan to the employee without charging any interest did not amount to any perquisite or benefit for the purposes of section 17(2) and/or section 40A(5) of the Act. It was further submitted that section 2(24)(iv), which has been invoked in this case also uses the expression "the value of any benefit or perquisite" which corresponds to the expression "the value of any benefit or amenity" appearing in the definition of "perquisite" as contained in section 17(2)(iii) of the Income-tax Act, 1961. Section 40A(5), Explanation 2(b), also seeks to include within the expression "perquisite" the value of any benefit or amenity granted or provided free of cost or at a concessional rate to the employee by the assessee. It was, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequently, the Finance Act, 1985, omitted the aforesaid amendments made by the Taxation Laws (Amendment) Act, 1984, with effect from the date of its insertion, namely, April 1, 1985, with a view to provide relief to salaried taxpayers. The very fact that the statute had to be amended at the first instance to bring the said item within the purview of the expression "perquisite" and it later sought to delete the same from the date of its insertion clearly shows that Parliament does not intend to treat interest-free loan or loan at a concessional rate as any benefit or perquisite granted or provided by the lender-company to the director or employee, as the case may be. If the loan granted to an employee without charging any interest or by charging interest at a concessional rate amounts to a benefit for the purposes of section 17(2)(iii) of the Act, there was no need for Parliament to introduce, by the Taxation Laws (Amendment) Act, 1984, the new sub clause (vi) in section 17(2) of the Act. The subsequent omission of the said sub-clause by the Finance Act of 1985 with effect from the date of its proposed insertion was also made with a view to give relief to salaried tax payers. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der to enlarge the meaning of the words or phrases occurring in the body of the statute. It is a cardinal rule of interpretation that if, by an inclusive definition, the meaning of the word is to be enlarged, it would receive a strict interpretation. It is also a cardinal rule of construction of a fiscal statute that, even if two views are possible, the view which is favourable to the assessee must be accepted while construing the provisions of a taxing statute. For the reasons aforesaid, the non-charging of interest on the amount overdrawn in the relevant year cannot be treated as a benefit for the purposes of section 17(2)(iii) of the Act. The question, however, remains as to whether the non-charging of interest will also fall within the purview of section 2(24)(iv) of the Act. For the purposes of applying section 2(24)(iv) of the Act, the same test as to what constitutes a benefit or a perquisite has to be applied. If the loan granted to an employee or a director or a person who has a substantial interest in the company without charging any interest or at a concessional rate of interest does not constitute any benefit for the purposes of Explanation 2(b)(iii) to section 40A(5 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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