5,21,241 made by the Income Tax Officer under section 40A 5 and sustained by the Commissioner of Income tax Appeals ?
Income tax Officer found that the directors of the assessee companypany were drawing amount from the companypany without paying interest He, therefore, held that when the companypany borrowed loans by paying 15 per cent interest and it advanced loans to its directors without any interest, to the extent of the interest the companypany companyld have charged, a benefit was granted to the directors and hence the said amount of interest on the amount advanced to the directors was number to be deducted as an expenditure in view of Section 40A 5 .
Assessee took the matter further in appeal before the Appellate Tribunal which deleted the additions made by the Income tax Officer.
The stand of the Revenue was that as long as there was a benefit whether direct or indirect the provisions of Section 40A 5 were attracted.
2000 2 SCR 1169 The Judgment of the Court was delivered by P. WADHWA, J. Civil Appeal No.
High Court in companying to its decision relied on two cases of the Madras High Court in Commissioner of Income Tax v. C. Kulandaivelu Konar, 1975 100 ITR 629 and Addl.
5,21,241 being 15 of the amount standing to the debit of the directors in the books of the assessee companypany by applying the provisions of Section 40A 5 and Section 17 2 of the Act The Income tax Officer found that the assessee, which was a companypany, was borrowing large sums by paying interest 15 per cent per annum.
Appellant Tribunal held that numberevidence had been laid by the Revenue to show mat borrowed funds were directly diverted for the benefit of the directors and number chargeable Interest on the debit balance in running account would number amount to providing perquisite.
High Court answered both the questions in negative and in favour of the Revenue.
In Civil Appeal Nos.
This interest was claimed by the assessee as deductible expenditure.
The balance outstanding as on the last date of the accountancy year was over Rs.
For the Assessment Years 1980 81 and 1981 82 in the case of the respondent Sri Shivanand v. Salgaocar, a director of M s. V.M. Salgaocar Brothers Pvt.
The assessee, a Company, fell aggrieved and sought leave to appeal under Article 136 of the Constitution which was granted.
Commissioner of Income Tax v. Late A.K. Lakshmi, 1978 113 ITR 368.
The Appellate Tribunal also observed that the Taxation Laws Amendment Act, 1984 for the first time provided that the difference in interest between the prescribed rate and that charged by an employer to the employee should be treated as perquisite.
Ltd. following question of law was referred to the High Court by the Appellate Tribunal under Section 256 1 of the Act Whether on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in upholding the action of the A.A.C. who held that number charging of interest companyld number be regarded as being a perquisite in the hands of me employee directors who were advanced interest free loans by the companypany?
2.50 lakhs.
On appeal filed by the assessee, the Commissioner of Income Tax Appeals upheld the orders of the Income tax Officer.
In this case for the assessment year 1979 80, the Income tax Officer had disallowed a sum of Rs.
Whether on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that number charging of interest on the debit balance in the running account of the directors would number companystitute a perquisite?
Reference was at the instance of Revenue.
657 of 1994 is directed against the judgment dated February, 7, 1992 of the Division Bench of the Karnataka High Court number reported as 1992 198 ITR 738 delivered on Reference made to it by the Income Tax Appellate Tribunal Appellate Tribunal for short under Section 256 2 of the Income Tax Act, 1961 for short, the Act .
Ltd., Vascoda gama, Goa .
4012 13 of 1998 it is the revenue which is aggrieved.
