TMI Blog1979 (5) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... found by the Income-tax Appellate Tribunal, the varying interest amounts earned by the two sons, a daughter and the wife of ,the assessee in the respective assessment years on the amounts advanced to them by the assessee are or are not to be taxed in the hands of the assessee, has been posed for the opinion of this court. The backdrop of the facts against which the opinion on the question posed is to be formulated can be stated thus: The assessee is the managing director of the Karnal Distillery Company Ltd., Karnal, hereinafter referred to as the company. The assessee had a deposit with the said company of a sum of Rs. 1,74,639 as reflected in the credit balance to his account in the account books of the said company. On the instructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn of income filed on, 16th August, 1963. Even on merits this income has to be assessed in the hands of the assessee. No genuine loans have been advanced and only book entries have been made to reduce the tax liability. The definition of the loan (according to the Chambers' Twentieth Century Dictionary) is: 'Anything lent especially money at interest and permission to use.' In this case, no interest had been charged and no actual handing and taking over of the money has taken place. The scrutiny of the accounts also reveals that during the year not even a single pie was withdrawn for the use of business. The company has paid Rs. 15,814 as interest to the partners. This amount in fact belongs to Shri S. P. Jaiswal and is taken in his hands." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t amount in question was taxed in his hands. In the later years, the ITO and the AAC remained consistent and continued to tax the interest income of the kind in the hands of the assessee, while the Tribunal on its part continued to follow the ratio of its decision rendered in regard to the assessment year 1964-65, from which had arisen I.T.R. No. 98 of 1977. The Tribunal, however, in regard to all the assessment years starting from 1964-65, referred the matter for the opinion of this court under s. 256(1) of the Act, posing the identical question, as already mentioned. Before embarking upon the consideration of the question referred for our opinion, one additional fact pertaining to the interest income in the hands of the wife of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to his three major children and wife, as the assessee had parted with the assets, that is, a sum of Rs. 1,74,639, on which the interest had been earned. The transaction cannot be termed benami either as there is no proof of the fact that income accrued on the said asset had in fact been received by the assessee instead of his said family members. Now, coming to the core of the controversy, that is, whether the advancing of the amount by the assessee was in the nature of a loan, it may be observed that the discussion before the Tribunal remained bogged down within the constraints imposed by the fact as to whether, for an advance of money to qualify as a loan, it is or is not necessary that the sum so advanced should carry interest. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company, on which they earned interest. In my opinion, the case clearly falls within the provisions of s. 61 of the Act which is in the following terms: " 61. All income arising to any person by virtue of a revocable transfer of assets shall be chargeable to income-tax as the income of the transferor and shall be included in his total income." The assessee appearing in person argued that the provisions of s. 61 of the Act are not attracted to the facts of the present case in that there has not been any transfer of assets, revocable or otherwise, for the word transfer " envisages, according to him, the transfer of ownership. This contention, in my opinion, utterly lacks in merit, in that the provision itself, in terms, envisag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners of s. 61 of the Act which envisages that all income arising to any person by virtue of revocable transfer of assets shall be chargeable to income-tax as the income of the transferor and shall be included in his total income. The learned Tribunal appeared to be greatly vexed by the fact that the revenue had accepted the wealth-tax return of the assessee showing the said amount as part of his wealth and the wealth-tax returns of the loanees who claimed deduction to the extent of the said credits advanced to them by the assessee, and also further by the circumstance that the revenue had already taxed the said interest income in the hands of the said major children and the wife of the assessee. In my opinion, there was no cause for gett ..... X X X X Extracts X X X X X X X X Extracts X X X X
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