Sh. Anil Kumar Sharma, New Delhi V. ACIT, New Delhi

CO 230/DEL/2015

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1186 (ITAT-DELHI)
• Duration Of Justice: 1 month(s) 12 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 11-08-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: AMRIT GOEL CA SHRI RAVI JAIN
• Keywords: Search and seizure; Deemed to accrue or arise in india; Question of law; Notional interest
• Section: 143(3); 153A; 6; 132; 15; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH:A NEW DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER I.T.A .NO. 6204/DEL/2013 (ASSESSMENT YEAR-2010-11) & CROSS OBJECTION NO. 230/DEL/2015 (ASSESSMENT YEAR-2010-11) ORDER PER CHANDRA MOHAN GARG, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE HAS BEEN DIRECTED AGAIN ST 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: ACIT, CENTRAL CIRCLE-7, NEW DELHI. VS ANIL KUMAR SHARMA, B3, AGCR ENCLAVE, NEW KARKARDOOMA, NEW DELHI. AUTPS1076K ANIL KUMAR SHARMA, B3, AGCR ENCLAVE, NEW KARKARDOOMA, NEW DELHI. AUTPS1076K VS ACIT, CENTRAL CIRCLE-7, NEW DELHI. APPELLANT BY SHRI AMRIT GOEL, CA RESPONDENT BY SHRI RAVI JAIN, CIT (DR) DATE OF HEARING 27.08.2015 DATE OF PRONOUNCEMENT 23.09.2015 ITA NO. 6204/D/2013 & CO NO. 230/D/2015 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS. 2,2 8,27,650/- 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 RISE TO THIS APP EAL ARE THAT A SEARCH AND SEIZURE OPERATION U/S 132 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) WAS CARRIED OUT ON 09/09/2010 IN THE M/S AMRAPALI GROUP OF CASES, WHICH, INTER-ALIA, INCLUDE THE ASSE SSEE SHRI ANIL KUMAR SHARMA WHO IS CHIEF MANAGING DIRECTOR OF M/S ULTRA HOME CONSTRUCTION PVT. LTD. (FOR SHORT UHC), THE FLAGSHI P COMPANY OF THE GROUP. THE CASE OF THE PRESENT ASSESSEE WAS CENTRA LIZED/TRANSFERRED TO CIRCLE NO. 7 BY AN ORDER U/S 127 OF THE ACT ISSUED BY COMMISSIONER OF INCOME TAX, DELHI-XII, VIDE F.NO. CIT-XII/CENTRALIZ ATION/2011-12/88 DATED 07.04.2011. THE ASSESSEE FILED ORIGINAL RETU RN U/S 139 OF THE ACT BY WAY OF E-FILING ON 03/03/2011 DECLARING AN INCOM E OF RS. 3,03,56,104/-. THE AO PASSED ASSESSMENT ORDER U/S 143(3) READ WITH SECTION 153A OF THE ACT ON 26/03/2013 MAKING TWO AD DITIONS VIZ. INCOME ON ACCOUNT OF BENEFIT/PERQUISITE U/S 2(24)(I V) OF THE ACT PERTAINING TO M/S AHS JOINT VENTURE (AHS) AND INCOM E ON ACCOUNT OF BENEFIT/PERQUISITE PERTAINING TO M/S AMRAPALI INFRA STRUCTURE PVT. LTD. (AIPL) ASSESSED THE TAXABLE INCOME AT RS. 5,31,83,7 54/- BY MAKING TOTAL ADDITION OF RS. 2,28,27,650/- UNDER THE SAID PROVISION. 3. BEING AGGRIEVED BY THE ABOVE ASSESSMENT ORDER, T HE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHICH WAS ALLOWED BY PASSING THE IMPUGNED ORDER AND THE AO WAS DIRECTED TO DELETE BO TH THE ADDITIONS. NOW THE AGGRIEVED REVENUE IS BEFORE THIS TRIBUNAL I N THE SECOND APPEAL WITH THE SOLE GROUND AS REPRODUCED HEREINABOVE. 4. WE HAVE HEARD THE ARGUMENT OF BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. 5. THE LD. DEPARTMENTAL REPRESENTATIVE (DR), SUPPOR TING THE ACTION OF THE AO, SUBMITTED THAT THE AMOUNT OF INTE REST FREE ITA NO. 6204/D/2013 & CO NO. 230/D/2015 3 LOAN/ADVANCE RECEIVED BY THE ASSESSEE FROM M/S AHS UNDER THE CURRENT ACCOUNT WAS PRIMARILY BEING USED FOR PROVID ING INTEREST FREE LOANS TO THE DIRECTORS/SUBSTANTIVE SHAREHOLDERS OF M/S UHCPL. THEREFORE, THE PAYMENT RECEIVED BY THE ASSESSEE AMO UNTING TO RS. 5,67,70,500/- FROM M/S UHCPL WAS ROOTED THROUGH THE FIRM I.E. M/S AHS JOINT VENTURE AND THUS, THIS TRANSACTION ATTRACT PROVISIONS OF SECTION 2(24)(IV) OF THE ACT. THE LD. DR FURTHER P OINTED OUT THAT THE INTEREST FREE ADVANCE SHOWN FROM THE BOOKS OF M/S A IPL APPARENTLY DO NOT FETCH INTEREST COST BUT THE FUND DEFINITELY HAS COST OF INTEREST WHICH THE DIRECTOR OF M/S AIPL VIZ. THE ASSESSEE SHRI ANI L SHARMA AND SHRI SHIV SHARMA WERE AVAILING BEING THEIR POSITION AS A SUBSTANTIVE SHAREHOLDERS OF M/S AIPL. THE LD. DR VEHEMENTLY CO NTENDED THAT THE AO TOOK A VERY BALANCING APPROACH BY TAKING RATE OF INTEREST @ 6% P.A. AND THE TOTAL INTEREST WAS COMPUTED AT RS. 3,01,58, 645/- OUT OF WHICH RS. 1,94,21,420/- PERTAINS TO ASSESSEE AND THE SAME AMOUNT WAS RIGHTLY TAXED IN THE HANDS OF THE ASSESSEE AS THE B ENEFIT/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) GR ANTED RELIEF TO THE ASSESSEE WITHOUT ANY JUSTIFIED REASON BECAUSE T HE SAID LOAN PAYMENT WERE DE-FACTO MADE BY UHCPL BUT ONLY ROOTED THROUGH M/S AHS JOINT VENTURE TO THE ASSESSEE. THE LD. DR LAST LY PRAYED THAT THE IMPUGNED ORDER MAY BE SET ASIDE BY RESTORING THAT O F THE AO. 7. REPLYING TO THE ABOVE, THE LD. AUTHORIZED REPRES ENTATIVE (AR) SUPPORTED THE ORDER OF THE FIRST APPELLATE AUTHORIT Y AND SUBMITTED THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED IN FAV OUR OF THE ASSESSEE BY THE ORDER OF THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF CIT VS. MADHU GUPTA REPORTED AS (2012) 205 TAXMA N 303 (P&H), WHEREIN IT WAS CATEGORICALLY HELD THAT THE INTEREST ON INTEREST FREE LOAN AVAILED BY THE ASSESSEE FROM A COMPANY IN WHICH SHE WAS A DIRECTOR ITA NO. 6204/D/2013 & CO NO. 230/D/2015 4 COULD NOT BE TREATED AS HER DEEMED INCOME U/S 2(24) (IV) OF THE ACT. HE FURTHER DRAWN OUR ATTENTION TOWARDS ASSESSEES PAPE R BOOK PAGE 19, 21 & 22 AND SUBMITTED THAT THE PROVISIONS OF SECTION 2 (24)(IV) OF THE ACT ARE NOT APPLICABLE IN THE CASE OF PARTNERSHIP FIRM BUT ARE APPLICABLE ONLY IN THE CASE OF COMPANIES AND THE AMOUNT RECEIV ED BY THE ASSESSEE FROM M/S AHS JOINT VENTURE IT IS AMPLE CLEAR THAT T HERE IS NO PAYMENT BY M/S UHCPL TO AHS WHICH CAN BE LINKED EVEN REMOTE LY TO THE SAID AMOUNT OF ADVANCE MADE BY AHS JOINT VENTURE TO THE ASSESSEE. THUS, THE PROVISION OF SECTION 2(24)(IV) OF THE ACT IS IN APPLICABLE TO THE PRESENT CASE. 8. THE LD. AR FURTHER POINTED OUT THAT REGARDING AM OUNT OF RS. 1,94,21,420/- RECEIVED FROM AMRAPALI INFRASTRUCTURE PVT. LTD. FROM THE LEDGER ACCOUNT IT IS CLEAR THAT NO AMOUNT WAS ACTUA LLY RECEIVED BUT IT WAS ONLY A GENERAL ENTRY PASSED AT THE END OF THE Y EAR I.E. 31/03/2010 DEBITING THE APPELLANT (ASSESSEE) ACCOUNT BY AN AMO UNT OF RS. 32,40,90,344/- AND CORRESPONDINGLY CREDITING THE UH CPL ACCOUNT TO ENHANCE THE PROMOTERS CONTRIBUTION IN THE JOINT VEN TURE PROJECT BETWEEN AIPL & UHCPL. THE LD. AR FURTHER SUBMITTED THAT THIS BOOK ENTRY WAS MADE TO FACILITATE BANK FINANCE FOR THE P ROJECT AND DOES NOT HAVE ANY TAX IMPLICATION AND HENCE UNDER THESE FACT UAL MATRIX AND LEGAL POSITION THE ADDITIONS MADE BY THE AO COULD N OT BE SUSTAINED WHICH WERE RIGHTLY DELETED BY THE LD. CIT(A). 9. ON A CAREFUL CONSIDERATION OF RIVAL SUBMISSIONS AT THE VERY OUTSET, WE OBSERVE THAT THE AO MADE IMPUGNED ADDITI ONS U/S 2(24)(IV) OF THE ACT BY OBSERVING THAT THE ASSESSEE ENJOYED B ENEFIT/PERQUISITE U/S 2(24)(IV) OF THE ACT FROM M/S AHS JOINT VENTURE AND M/S AIPL AS INTEREST FREE LOANS AND HE BY APPLYING INTEREST RAT E @ 6% P.A. COMPUTED THE NOTIONAL INTEREST AND ADDED THE SAME TO THE RET URN INCOME OF THE ITA NO. 6204/D/2013 & CO NO. 230/D/2015 5 ASSESSEE. DURING FIRST APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED FOLLOWING EXPLANATION BY WAY OF WRITTEN SUBMISSIONS : 1. AT THE OUTSET, IT IS SUBMITTED THAT THE ASSES SEE HAS NEITHER RECEIVED ANY INTEREST INCOME NOR ANY INTERE ST HAS ACCRUED TO IT. IT IS ONLY THE REAL INCOME THAT CAN BE BROUGHT TO TAX. IN THE ABSENCE OF ANY REAL INCOME, THERE C AN BE NO TAXABILITY. THE ADDITIONS MADE BY THE AO ARE OF HYPOTHETICAL INCOME AND NOT OF ANY REAL INCOME. TH E AO HAS HIMSELF RECOGNIZED THE ADDITIONS AS ON ACCOUNT OF NOTIONAL INCOME. THE QUESTION WHICH NEEDS TO BE AS KED 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 ES TIMATION, ASSUMPTION AND PRESUMPTION ESTABLISH THAT THERE IS NO REAL INCOME AND IT IS ONLY THE HYPOTHETICAL INCOME ADDED BY AO. THE HONBLE APEX COURT IN THE CASE OF GODHRA ELECTR ICITY CO. LTD. (1997) 225 ITR 746 (SC) HELD THAT THE COMPUTATI ON 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 BO TH 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 C ASE OF CIT VS. SUJATA VS. MANOHAR AND G.B. PATTANAIK (1999 ) 236 ITR 315 (SC). 2. THERE IS NO INVOLVEMENT OF ANY BENEFIT OR PER QUISITE 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 COMPA NY AND THE ASSESSEE REGARDING PROVISION OR PAYMENT BY THE COMPANY OF ANY PERQUISITE, BENEFIT OR MEETING OBLIG ATION OF ASSESSEE. IT IS NOT A CASE THAT SOME INTEREST WAS TO BE CHARGED BY AHS JOINT VENTURE AND AMRAPALI INFRASTRUC TURE P. LTD. FROM THE APPELLANT, BUT WAS WAIVED BY THEM SO AS TO HOLD IT TO BE A PERQUISITE OR BENEFIT. THERE IS NO BASIS FOR COMPUTING THE NOTIONAL INTEREST INCOME @6%. THE TRANSACTIONS INVOLVED IN THE APPELLANTS CASE ARE M ONEY TRANSACTIONS AND, THEREFORE, THERE IS NO APPLICABIL ITY OF SECTION 2(24)(IV). SECTION 2(24)(IV) DEALS WITH AN Y BENEFIT OR PERQUISITE WHETHER CONVERTIBLE INTO MONEY OR N OT. THUS, IT CANNOT BE MONEY ITSELF BECAUSE IF IT IS MONEY, THE QUESTION OF ITS CONVERTIBILITY INTO MONEY OR NOT WILL NOT ITA NO. 6204/D/2013 & CO NO. 230/D/2015 6 ARISE. THE SECTION SPEAKS OF VALUE OF ANY PERQUISI TE OR BENEFIT. 2.1 IN THE CASE OF CIT VS. G. VENKATARAMAN (1978) 111 ITR 444 (673) (MAD.), THE HONBLE HIGH COURT WHILE CONS IDERING THE PROVISIONS OF SECTION 2(24)(IV) {CORRESPONDING SECTION 2(6C)(III) OF INDIAN INCOME TAX, 1922} HELD AS UNDE R: - THERE ARE TWO ASPECTS OF THE MATTER TO BE CONSIDER ED WITH REFERENCE TO THIS PROVISIONS, VIZ., (1) IN THE FIRST PLACE, THE SECTION USES THE EXPRESSION, THE VALUE OF ANY BENEFIT OR PERQUISITE, WHETHER CONVERTIBLE INTO MON EY OR NOT. FROM THIS LANGUAGE IT IS CLEAR THAT THE BEN EFIT OR PERQUISITE CONTEMPLATED CANNOT BE MONEY ITSELF. I F IT IS MONEY, THE QUESTION OF ITS VALUE BEING TAKEN INTO A CCOUNT OR THE BENEFIT OR PERQUISITE BEING CONVERTED INTO M ONEY WILL NOT ARISE. SECONDLY, THE VERY SAME SECTION MA KES A DISTINCTION BETWEEN BETWEEN OR PERQUISITE ON THE ONE HAND AND ANY SUM PAID ON THE OTHER. THAT ITSELF WILL SHOW THAT THE BENEFIT OR PERQUISITE CONTEMPLATED BY THIS SECTION SHOULD BE OTHER THAN MONEY. 2.2 IN THE CASE OF RAVINDER SINGH VS. CIT (1994) 2 05 ITR 353 (DELHI), THE ASSESSEE WAS A PARTNER IN A FIRM. DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF THE FIRM, T HE AO FOUND DEBIT BALANCE IN THE CAPITAL ACCOUNT OF ASSES SEE AND THAT THE ASSESSEE HAD UTILIZED THOSE OVER WITHDRAWN FUNDS WITHOUT PAYING ANY INTEREST. THE AO APPLYING SECTIO N 28(IV) MADE ADDITION ON ACCOUNT OF INTEREST INCOME @9% BY HOLDING IT TO BE BENEFIT OR PERQUISITE. THE COURT HELD THA T TRANSACTION BEING RELATING TO A CASH PAYMENT, IT CANNOT BE A BE NEFIT OR PERQUISITE: THE PRECISE FINDING OF HONBLE COURT W AS AS UNDER: THEN THERE IS ANOTHER ASPECT OF THE MATTER. SECTIO N 28(IV) CAN BE INVOKED ONLY WHERE THE BENEFIT OR PERQUISITE IS OTHER THAN THE CASH. VALUE OF A THIN G WOULD BE THE AMOUNT OF MONEY THAT IT IS WORTH. VALUELESS IS WHAT IS WORTHLESS. IN INSTALLMENT SUP PLY (P) LTD. VS. CIT [1984] 149 ITR 457, THIS COURT EXAMINED THE TERM WHETHER CONVERTIBLE INTO MONEY O R NOT AS APPEARING IN SECTION 40(A)(V) OF THE ACT WHE N 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 INCO ME-TAX ACT, 1961, REIMBURSEMENT OF THE MEDICAL EXPENSES TO THE MANAGING DIRECTOR HAS BEEN CORRECTLY RESTRICTED BY THE TRIBUNAL TO RS. 12,000 FOR EACH OF THE ASSESSMENT Y EARS 1969-70 AND 1970-71? ITA NO. 6204/D/2013 & CO NO. 230/D/2015 7 THIS COURT HELD THAT USE OF THE WORDS WHETHER CONVERTIBLE INTO MONEY OR NOT GOES TO SHOW THAT TH E TERM BENEFIT OR AMENITY OR PERQUISITE CANNOT RELA TE TO CASH PAYMENTS. IN CIT VS. ALCHEMIC (P) LTD. [1981] 130 ITR 168 (GUJ. ), THE TERM BENEFIT OR PERQUISITE ARISING FROM BUSIN ESS AS APPEARING IN SECTION 28(IV) FELL FOR CONSIDERATI ON. THE COURT HELD THAT IF WHAT WAS RECEIVED EITHER BY WAY OF BENEFIT OR PERQUISITE WAS MONEY, THERE WAS N O QUESTION OF CONSIDERING THE VALUE OF SUCH MONETARY BENEFIT OR PERQUISITE UNDER CLAUSE (IV) OF SECTION 28. IT HELD THAT IT WAS ONLY IF THE BENEFIT OR PERQUISITE WAS NOT IN CASH OR MONEY THAT SECTION 28(IV) WOULD APPL Y. 2.3 IN THE CASE OF CIT MADHU GUPTA (2012) 303 TAXM AN 303 (P&H) THE HONBLE PUNJAB & HARYANA HIGH COURT HELD THAT INTEREST ON INTEREST FREE LOANS AVAILED BY ASSESSEE FROM COMPANIES IN WHICH SHE WAS A DIRECTOR, COULD NOT BE TREATED AS PER DEEMED INCOME IN TERMS OF SECTION 2(24)(IV). 2.4 IN THE CASE OF DCIT VS. ASHOK KUMAR AMIT KUMAR & SHIPRA ESTATES (P) LTD. (ITA NO. 3247/DEL/2012), THE HONBLE DELHI BENCH OF ITAT VIDE ITS ORDER DATED 27.08.2013 HELD THAT GRANTING OF INTEREST FREE ADVANCES CANNOT BE TREATE D AS BENEFIT OR PERQUISITE. 3. THERE IS YET ANOTHER REASON BECAUSE OF WHICH TH E ADDITIONS MADE BY THE AO IS NOT SUSTAINABLE. THE V ALUE OF ANY BENEFIT OR PERQUISITE AS REFERRED TO IN SECTION 2(24)(IV) OF INCOME TAX ACT, 1961, OBVIOUSLY AND NECESSARILY HAS TO BE THE COST/LOSS INCURRED/SUFFERED BY THE COMPANY. IN THE APPELLANTS CASE BEFORE YOUR HONOUR, BECAUSE OF THE INTEREST FREE ADVANCES RECEIVED BY THE ASSESSEE COMPANY, THE RE HAS BEEN NO COST INCURRED/NO LOSS SUFFERED BY AHS JOINT VENTURE OR AMRAPALI INFRASTRUCTURE PVT. LTD. AS THEY HAD TH E AVAILABILITY OF INTEREST FREE FUNDS WITH THEM. THE AO HAS HIMSELF ADMITTED IN PARA 6.2 OF THE ASSESSMENT ORDE R THAT THE INTEREST FREE FUNDS ADVANCES SHOWN FROM THE COMPANY APPARENTLY DO NOT FETCH INTEREST COST. IN VIEW OF THIS ADMITTED POSITION BY AO, THERE COULD HAVE BEEN NO JUSTIFICATI ON FOR THE AO TO GIVE A VALUE TO THE SO CALLED BENEFIT OR PERQU ISITE AND MADE ADDITION THEREOF. IN THE CASE OF ASHOK W. PHAN SALKAR VS. ITO (2010) 38 SOT 136 (MUM.), THE ASSESSEE COMP ANY PURCHASED A FLAT FROM A COMPANY, IN WHICH HE WAS A DIRECTOR FOR A SUM OF RS. 10 LACS, THE VALUE OF WHICH IN THE BOOKS OF COMPANY WAS RS. 75.90 LACS RESULTING INTO LOSS OF RS. 65.90 LACS TO THE COMPANY. THE AO BASED ON MARKET VALUE O F FLAT ITA NO. 6204/D/2013 & CO NO. 230/D/2015 8 AND OTHER FACTORS COMPUTED THE VALUE OF PERQUISITE/ BENEFIT U/S 2(24)(IV) AT RS. 80 LACS AND MADE ADDITION THER EOF TO THE ASSESSEES INCOME. THE HONBLE ITAT HELD THAT SINCE THE COMPANY HAS SUFFERED LOSS OF RS. 65.90 LACS, LOSS SO SUFFERED COULD ONLY BE CONSIDERED AS A BENEFIT RECEIVED BY T HE ASSESSEE U/S 2(24)(IV) OF INCOME TAX ACT, 1961. 4. WITH REGARD TO ADDITION OF RS. 3406230/- IN RE SPECT OF ADVANCES RECEIVED FROM AHS JOINT VENTURE, THE AO HAS IGNORED THE BASIC PROVISIONS OF SECTION 2(24)(IV) O F THE INCOME TAX ACT, 1961. THE AMOUNT OF RS. 3406230/- ADDED BY AO AS 6% INTEREST IS ON RS. 56770500/- WHICH HAS BEEN R ECEIVED FROM AHS JOINT VENTURE. M/S AHS JOINT VENTURE IS NO T 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 THA T AMOUNT ADVANCED BY AHS JOINT VENTURE IN A DE-FACTO PAYMENT BY ULTRA HOME CONSTRUCTION P. LTD., IT IS SUBMITTED TH AT FIRSTLY, THERE IS NO NEXUS ESTABLISHED BY THE AO BETWEEN THE AMOUNT RECEIVED BY AHS JOINT VENTURE FROM ULTRA HOME CONST RUCTION P. LTD. AND THE AMOUNT GRANTED BY AHS JOINT VENTURE TO THE ASSESSEE. MOREOVER, UNDER ANY CIRCUMSTANCES, NO AD VERSE 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 O WN TRANSACTIONS BETWEEN THEM. THE AO HAS HIMSELF ASSES SED AHS JOINT VENTURE AND M/S UHCPL AS SEPARATE ENTRIES. THERE IS NO CONCEPT OF SO CALLED DE-FACTO PAYMENT AS HAS BEEN INVENTED BY AO. 5. YET ANOTHER REASON BECAUSE OF WHICH THE ADDITIO N OF RS. 1,94,21,420/- MADE BY AO IN RESPECT OF ADVANCES FROM AMRAPALI INFRASTRUCTURE P. LTD. (AIPL) IS THAT, SIN CE THERE IS NO CASE OF RECEIPT OF ANY AMOUNT BY THE APPELLANT FROM AIPL THERE IS NO QUESTION OF ANY PERQUISITE/BENEFIT ACCR UING TO THE APPELLANT. AS CAN BE SEEN FROM THE LEDGER ACCOUNT O F APPELLANT IN THE BOOKS OF AIPL, THE SAME IS ON ACCO UNT OF JOURNAL ENTRIES IN RELATION TO PROJECT CONTRIBUTION TO ULTRA HOME AND THAT TOO AT THE END OF THE YEAR. M/S AIPL & M/S ULTRA HOME BETWEEN THEMSELVES AND ALSO ALONG WITH THE APP ELLANT HAVE BEEN DOING REAL ESTATE PROJECTS. THE INDIVIDU AL PROMOTERS BEING, FOUNTAIN HEADS OF THE GROUP, ARE R EQUIRED TO BE INVOLVED IN THE PROJECTS BY THE BANKERS AND OTHE R STAKEHOLDERS. SINCE NO MONEY HAS COME INTO THE BAN K ITA NO. 6204/D/2013 & CO NO. 230/D/2015 9 ACCOUNT OF ASSESSEE, THERE IS NO QUESTION OF ANY BE NEFIT OR PERQUISITE BEING ACCRUING TO THE APPELLANT. 6. ANOTHER REASON BECAUSE OF WHICH THE ADDITION OF RS. 19421420/- MADE BY THE AO IN RESPECT OF ADVANCES FRO M AIPL IS LIABLE TO BE DELETED IS THAT THE TRANSACTIO N BEING COMMERCIAL TRANSACTIONS, THERE IS NO CASE FOR APPLI CABILITY OF SECTION 2(24)(IV) OF THE INCOME TAX ACT, 1961. IT H AS BEEN DULY EXPLAINED TO AO THAT THE TRANSACTIONS AND BALA NCE OUTSTANDING AS ADVANCE WERE IN RELATION TO PROPERTY /PROJECT. THE AO HAS HOWEVER, BRUSHED ASIDE THE SUBMISSION OF APPELLANT BY MERELY REFERRING TO THE BOOK VALUE OF PROPERTIES, IGNORING THE MARKET VALUE AND ALSO THE FACT THAT TH E ADVANCES WERE ALSO FOR PROPERTIES/PROJECTS TO BE ACQUIRED/DE VELOPED. IN VIEW OF THE FACT THAT TRANSACTION IS A COMMERCIA L TRANSACTION, THERE IS NO APPLICABILITY OF SECTION 2 (24)(IV) OF INCOME TAX ACT, 1961. IN VIEW OF THE ABOVE, IT IS SUBMITTED THAT THE ADDI TIONS MADE U/S 2(24)(IV) BY THE AO, BEING ERRONEOUS ON FACTS AN D IN LAW, IS LIABLE TO BE DELETED. 10. FROM VIGILANT READING OF THE IMPUGNED ORDER OF THE CIT(A), WE NOTE THAT THE FIRST APPELLATE AUTHORITY GRANTED REL IEF TO THE ASSESSEE WITH FOLLOWING OBSERVATIONS AND CONCLUSIONS: 4.2 I HAVE CONSIDERED THE ASSESSMENT ORDER, THE S UBMISSIONS MADE AND THE DOCUMENTS FILED. AS REGARDS THE AMOUNT OF RS. 34,06,230/- RECEIVED BY THE APPELLANT FROM M/S AHS JOINT VENTURE (AHS), IT IS SEEN FROM THE LEDGER ACCOUNT TH AT THERE IS NO PAYMENT BY M/S ULTRA HOME CONSTRUCTION P. LTD. (UHC ) TO AHS WHICH CAN BE LINKED EVEN REMOTELY TO THE SAID ADVAN CE. THEREFORE, THE AVERMENT OF THE REVENUE THAT THE ADV ANCE ORIGINATED FROM UHC HAS NO FACTUAL BASIS. IT IS FU RTHER NOTED THAT THE PROVISIONS OF SECTION 2(24)(IV) ARE NOT AP PLICABLE 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 RS. 1,94,21,420/- REC EIVED FROM AMRAPALI INFRASTRUCTURE P. LTD. (AIPL), IT IS SEEN FROM THE LEDGER ACCOUNT THAT THERE IS NO AMOUNT ACTUALLY RECEIVED B UT IT IS ONLY A JOURNAL ENTRY PASSED ON 31.03.2010 DEBITING THE APP ELLANTS ACCOUNT BY AN AMOUNT OF RS. 32,40,90,344/- (AND CORRESPONDINGLY CREDITING THE UHC ACCOUNT) TO ENHAN CE THE PROMOTERS CONTRIBUTION IN THE JOINT VENTURE PROJEC T BETWEEN AIPL AND UHC. THIS BOOK ENTRY WAS MADE TO FACILITATE BA NK FINANCE FOR THE PROJECT AND DOES NOT HAVE ANY TAX IMPLICATI ON AS SUCH. IN ITA NO. 6204/D/2013 & CO NO. 230/D/2015 10 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 RS. 2,28,2 7,650/-. 11. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISS IONS OF BOTH THE SIDES AND OPERATIVE PART OF THE IMPUGNED ORDER OF T HE FIRST APPELLATE AUTHORITY, WE NOTE THAT THE AO INVOKED PROVISIONS O F SECTION 2(24)(IV) OF THE AND FOR MAKING TWO ADDITIONS FIRST OF RS. 34,06 ,230/- AND SECOND OF RS. 1,94,21,420/-. IN REGARD TO FIRST ADDITION THE LD. DEPARTMENTAL REPRESENTATIVE (DR) POINTED OUT THAT AS PER PARA 5 TO 5.3 OF THE ASSESSMENT ORDER THE ASSESSEE ENJOYED THE BENEFIT O F THE INTEREST FREE LOAN OF RS. 5,67,70,500/- FROM M/S AHS JOINT VENTUR E BUT DE-FACTO THIS INTEREST FREE LOAN WAS MADE BY M/S UHCPL WHICH WERE ROATED THROUGH THE PARTNERSHIP FIRM M/S AHS JOINT VENTURE. THEREFORE, THE AO WAS RIGHT IN MAKING ADDITION IN THIS REGARD BY C ALCULATING THE INTEREST @6% P.A. THE CONTENTION OF THE LD. AR IS THAT THERE WAS NO PAYMENT MADE BY M/S UHCPL TO M/S AHS JOINT VENTURE WHICH CAN BE LINKED EVEN REMOTELY TO THE SAID ADVANCED AMOUNT. THEREFORE, THE PROVISIONS OF SECTIN 2(24)(IV) OF THE ACT ARE NOT A PPLICABLE IN THE CASE OF PARTNERSHIP FIRM AND THE SAME ARE APPLICABLE ONLY I N THE CASES OF COMPANIES. 12. ON A CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS FROM THE BARE READING OF THE LEDGER ACCOUNT OF ASSESSEE SHRI ANIL KUMAR SHARMA IN THE BOOKS OF AHS JOINT VENTURE FROM 01/04/2009 TO 3 1/03/2010 IT IS APPARENT THAT THERE WAS NO TRANSACTION DURING THE F INANCIAL PERIOD AND THE AMOUNT OF OPENING BALANCE AT THE BEGINNING OF T HE YEAR REMAINED SAME AT THE END OF THE FINANCIAL PERIOD WHICH HAS B EEN SHOWN AS CLOSING BALANCE. FROM THE LEDGER ACCOUNT OF UHCPL IN THE BOOKS OF AHS JOINT VENTURE FOR THE SAME FINANCIAL PERIOD, WE ARE UNABLE TO SEE ANY ENTRY WHICH COULD LEAD US TO AN INFERENCE THAT THE UHCPL ADVANCED INTEREST FREE LOANS TO THE ASSESSEE THROUG H AHS JOINT ITA NO. 6204/D/2013 & CO NO. 230/D/2015 11 VENTURE. THEREFORE, WE ARE IN AGREEMENT WITH THE CON CLUSION OF THE CIT(A) THAT FROM THE LEDGER ACCOUNTS OF THE ASSESSE E AND M/S UHCPL IN THE BOOKS OF AHS JOINT VENTURE THERE IS NO PAYMEN T FROM UHCPL TO AHS JOINT VENTURE WHICH COULD BE LINKED EVEN REMOTE LY TO THE SAID INTEREST FREE LOAN TO THE ASSESSEE. UNDISPUTEDLY A ND ADMITTEDLY AHS JOINT VENTURE IS A PARTNERSHIP FIRM AND PROVISIONS OF SECTION 2(24)(IV) OF THE ACT ARE ONLY APPLICABLE IN THE CASE OF COMPANIE S AND THE SAME IS NOT APPLICABLE IN THE CASE OF PARTNERSHIP FIRM, THU S, CONCLUSION OF THE CIT(A) IN THIS REGARD IS CORRECT AND WE UPHOLD THE SAME. 13. COMING TO THE NEXT LIMB OF THE ISSUE REGARDING ADDITION OF RS. 1,94,21,420/- THE LD. DR POINTED OUT PARA NO. 6 TO 6.3 OF THE ASSESSMENT ORDER AND SUBMITTED THAT THE INTEREST FR EE LOAN AMOUNT RECEIVED BY THE ASSESSEE FROM M/S AIPL DIRECTLY ATT RACTS PROVISIONS OF SECTION 2(24)(IV) OF THE ACT BECAUSE INTEREST FREE ADVANCE RECEIVED BY THE DIRECTORS SHOULD BE TREATED AS BENEFIT/PERQUISITE R ECEIVED BY THE DIRECTOR AS THEY ARE PERSON WHO CONTROL THE AFFAIRS OF THE ASSESSEE COMPANY AND THE GROUP COMPANIES AND ADVANCING INTER EST 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 TAK ING THE RATE OF INTEREST OF 6% P.A. AND MADE THE ADDITION ON CORREC T AND JUSTIFIED BASIS. THE LD. DR VEHEMENTLY POINTED OUT THAT THE CIT(A) GRANTED RELIEF TO THE ASSESSEE WITHOUT ANY BASIS AND, THEREFORE, I MPUGNED ORDER MAY BE SET ASIDE BY RESTORING THAT OF THE AO ON THIS IS SUE. 14. REPLYING TO THE ABOVE, THE LD. AR SUBMITTED THA T THE ASSESSEE DID NOT ACTUALLY RECEIVE ANY INTEREST FREE LOAN OR ADVANCE BUT IT WAS ONLY A JOURNAL ENTRY PASSED ON 31/03/2010 DEBITING THE ASSESSEES ACCOUNT BY AN AMOUNT OF RS. 32,40,90,344/- AND CORR ESPONDINGLY ITA NO. 6204/D/2013 & CO NO. 230/D/2015 12 CREDITING THE UHCPL ACCOUNT TO ENHANCE THE PROMOTER S CONTRIBUTION IN THE JOINT VENTURE PROJECT BETWEEN AIPL AND UHCPL. T HE LD. AR FURTHER POINTED OUT THAT THE SAID JOURNAL ENTRY WAS MADE TO FACILITATE BANK FINANCE FOR THE PROJECT AND DOES NOT HAVE ANY TAX I MPLICATION AS WRONGLY NOTED BY THE AO. 15. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSION AN D FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE OBSERVE THAT SECTION 2(24)(IV) OF THE ACT DEALS WITH ANY BENEFIT OR PERQUISITE, W HETHER CONVERTIBLE INTO MONEY OR NOT. THEREFORE, OBVIOUSLY AND NECESS ARILY THERE MUST BE SOME COST/LOSS INCURRED/SUFFERED BY THE COMPANY. I N THE PRESENT CASE THE AO HAS HIMSELF ADMITTED IN PARA 6.2 OF THE ASSE SSMENT ORDER THAT THE INTEREST FREE FUNDS ADVANCE SHOWN FROM THE COMP ANY TO THE ASSESSEE APPARENTLY DO NOT FETCH INTEREST COST. AT THE SAME TIME, WE ALSO OBSERVE THAT FROM THE COPY OF THE LEDGER ACCOU NT OF SHRI ANIL KUMAR SHARMA IN THE BOOKS OF AIPL FOR THE PERIOD OF 31/03/2010 TO 31/03/2011 IT IS AMPLY CLEAR THAT THERE WAS A GENER AL DEBIT ENTRY ON 31/03/2010 AMOUNTING TO RS. 32,40,10,344/- AND THER E WAS NO ACTUAL TRANSFER OF ANY FUNDS/ADVANCE/LOANS. 16. WHEN WE CONSIDER THE RATIO OF THE JUDGMENT OF H ONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MADHU G UPTA (SUPRA), WE NOTE THAT THEIR LORDSHIPS HELD THAT INTEREST ON INT EREST FREE LOANS AVAILED BY THE ASSESSEE FROM A COMPANY IN WHICH SHE WAS A DIRECTOR, COULD NOT BE TREATED AS DEEMED INCOME U/S 2(24)(IV) OF THE ACT. THE RELEVANT OPERATIVE PART OF THIS ORDER AT PARAS 9 TO 11 READS AS UNDER: 9 . LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT TH E JUDGMENTS OF CALCUTTA HIGH COURT AS ALSO OF MADRAS HIGH COURT REFERRED TO BY THE COUNSEL FOR THE REVENU E HAVE BEEN CONSIDERED BY THE HONBLE SUPREME COURT I N V.M. SALGAOCAR & BROS. (P) LTD. VS. CIT [2000] 243 ITR 383 /110 TAXMAN 67 (SC). THE HONBLE SUPREME COURT HAS APPROVED THE VIEW OF CALCUTTA HIGH COURT AND AL SO NOTICED THAT THE JUDGMENTS OF MADRAS HIGH COURT ARE ITA NO. 6204/D/2013 & CO NO. 230/D/2015 13 PRIOR TO AMENDMENT CARRIED OUT BY THE TAXATION LAWS (AMENDMENT) ACT, 1984 AND CONSEQUENT REPEAL BY THE FINANCIAL ACT, 1985. SUCH INTERVENTION MAKES THE INTENTION OF THE LEGISLATURE CLEAR THAT HAD THE EXI STING PROVISIONS BEEN SUFFICIENT TO TREAT THE BENEFIT OF INTEREST FREE LOAN, AS DEEMED INCOME, THE SAME WOULD NOT HAV E BEEN INCORPORATED BY WAY OF AMENDMENT AND SUBSEQUENT REPEALED. IN THE AFORESAID CASE, THE ASSESSEE WAS IN APPEAL AGGRIEVED AGAINST THE JUDGME NT OF KARNATAKA HIGH COURT, WHEREIN RELIANCE WAS PLACE D UPON JUDGMENTS OF MADRAS HIGH COURT, AS MENTIONED ABOVE. THE HONBLE SUPREME COURT HAS ALSO QUOTED W ITH APPROVAL, THE PASSAGE FROM THE JUDGMENT OF P.R.S. OBEROIS 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 PERIOD PRIOR TO THE 1984 AMENDMENT AND THE MADRAS HIGH COURT HAD NO OCCASION TO CONSIDER THE IMPACT OF THE AMENDMENTS TO SECTION 17(2) AND SECTION 40A(5) OF THE ACT. ****** THE HIGH COURT IN THE IMPUGNED JUDGMENT COULD NOT HAVE BRUSHED ASIDE THE CONSIDERATION OF THE AMENDING ACT, 1984 AND ITS SUBSEQUENT REPEAL BY THE FINANCE ACT 1985, BY TERMING THEM OF NO CONSEQUENCE ACT. 10 . AT THIS STAGE, WE MAY NOTICE THAT SECTION 17 FALL ING IN CHAPTER IV DEALS COMPUTATION OF INCOME UNDER THE ITA NO. 6204/D/2013 & CO NO. 230/D/2015 14 HEAD SALARY. SECTION 17(2) DEFINES PERQUISITE FOR THE PURPOSES OF SECTIONS 15 & 16 AND FOR THE PURPOSES O F SECTION 17, WHEREAS SECTION 40A CONTEMPLATES THAT TH E COMPUTATION OF INCOME UNDER THE HEAD PROFITS AND G AINS OF BUSINESS OR PROFESSION. SECTION 2(24)(IV) DOES NOT DEFINE THE EXPRESSION ANY BENEFIT OR PERQUISITE. THE PERQUISITE HAS BEEN DEFINED IN SECTION 17(2) AND ALSO WERE DEFINED IN SECTION 40A(5) PRIOR TO ITS OMISSION BY DIRECT TAX LAWS (AMENDMENT) ACT, 1987. THE PROVISI ONS OF SECTION 40A(5) PRIOR TO ITS OMISSION, DEAL WITH EXPENDITURE RESULTING DIRECTLY OR INDIRECTLY IN THE PROVISION OF ANY PERQUISITE WHETHER CONVERTIBLE INT O MONEY OR NOT I.E. THE CONVERSE OF SECTION 2(24)(IV) . THEREFORE, THE INTERPRETATION IN V.M. SALGAOCAR AND BROS. P. LTD.S CASE (SUPRA) INTERPRETING SECTION 17(2) A ND EFFECT OF AMENDMENT IN SECTION 40A(5) WOULD BE APPLICABLE T O THE EXPRESSION BENEFIT AND PERQUISITE APPEARING I N SECTION 2(24)(IV) AS WELL AS IS OBSERVED BY CALCUTT A HIGH COURT. THE JUDGMENT OF CALCUTTA HIGH COURT IN P.R.S . OBEROIS CASE (SUPRA) CONSIDERING THE BENEFIT OF PERQUISITE APPEARING IN SECTION 2(24)(IV) OF THE ACT , HAS BEEN APPROVED BY THE HONBLE SUPREME COURT. 11 . IN VIEW OF THE AFORESAID JUDGMENTS, WE ARE OF THE OPINION THAT INTEREST ON INTEREST FREE LOANS ADVANC ED TO THE ASSESSEE BY THE COMPANY CANNOT BE TREATED AS DEEMED INCOME IN TERMS OF SECTION 2(24)(IV) OF THE ACT. 17. ON SIMILAR ISSUE THE HONBLE JURISDICTIONAL HIG H COURT OF DELHI, FOLLOWING THE LAW LAID DOWN BY THE HONBLE APEX COU RT IN THE CASE OF V.M. SALGAONCAN AND BROS. PVT. LTD. VS. CIT (2000) 243 ITR 383 (SC) , IN THE JUDGMENT IN THE CASE OF SOHAN SINGH VS. CIT (2002) 253 ITR 331 (DELHI) HELD THAT IN VIEW OF INSERTION OF SECTION 17(2)(VI ) OF THE ACT AND THE AMENDMENT OF SECTION 40A(5) OF THE ACT BY THE T AXATION LAWS (AMENDMENT) ACT, 1984 AND THEIR SUBSEQUENT DELETION W.E.F. 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 AS SESSEES INCOME U/S 2(24)(IV) OF THE ACT. THE RELEVANT OPERATIVE PART OF THE ORDER OF THE HONBLE HIGH COURT AT PAGE 332-333 IS BEING RESPECT FULLY REPRODUCED AS FOLLOWS: ITA NO. 6204/D/2013 & CO NO. 230/D/2015 15 THE APEX COURT HAD AN OCCASION TO CONSIDER A SIMILAR QUESTIN IN V.M. SALGAOCAR AND BROS. PVT. LT D. VS. CIT [2000] 243 ITR 383. IT WAS, INTER ALIA, HEL D 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 ADVANCED BY CHARGING INTEREST AT A RATE LOWER THAN THE RATE SO SPECIFIED, THE DIFFERENCE BETWEEN THE RATE OF INTEREST CALCULATED IN THE PRESCRIBED MANNER ON SUCH LOAN AT THE RATE SO SPECIFIED AND THE INTEREST CHARGED BY THE EMPLOYER, SHALL BE DEEMED TO BE A PERQUISITE. AN AMENDMENT ON SIMILAR LINES WAS MADE IN SECTION 40A OF THE ACT TO PROVIDE THAT THE AMOUNT OF INTEREST REFERRED TO AN ITEM (A) OR ITEM (B), AS THE CASE MAY BE OF SUB-CLAUSE (VI) OF SECTION 17(2) OF THE ACT, SHALL BE REGARDED AS PERQUISITE PROVIDED BY THE ASSESSEE TO HIS EMPLOYEE FOR THE PURPOSES OF SECTION 40A(5) OF THE ACT. THESE AMENDMENTS WERE INTENDED TO TAKE EFFECT FROM APRIL 1, 1985. HOWEVER, SUBSEQUENTLY, THE FINANCE ACT, 1985, SOUGHT TO OMIT BOTH THE AFORESAID PROVISIONS WITH EFFECT FROM THE DATE OF THEIR INSERTION, NAMELY, APRIL 1, 1985. CLAUSE 20 OF THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE FINANCE BILL, 1985 [152 ITR (ST.) 91], STATED THAT AS A MEASURE OF RELIEF TO SALARIED TAXPAYERS, THE BILL SOUGHT TO OMIT THE AFORESAID PROVISION WITH EFFECT FROM THE DATE OF ITS PROPOSED INSERTION, NAMELY, APRIL 1, ITA NO. 6204/D/2013 & CO NO. 230/D/2015 16 1985. THE CENTRAL BOARD OF DIRECT TAXES ISSUED A CIRCULAR DATED JUNE 12, 1985, INCORPORATING THE OBJECTIVES SOUGHT TO BE ACHIEVED BY OMISSION OF CLAUSE (VI). EARLIER, THE CENTRAL BOARD OF DIRECT TAXES HAD ISSUED A CIRCULAR EXPLAINING THE OBJECTIVES IN INSERTING CLAUSE (VI). BY THE 1984 AMENDMENT ACT, PARLIAMENT WANTED TO CARVE OUT A PARTICULAR EXCEPTION FROM THE OTHERWISE EXCLUSIONARY CLAUSES FOR THE PURPOSES OF COMPUTATION OF INCOME-TAX. THIS PROVIDES A CLEAR DIRECTION TO INTERPRET THE PROVISIONS OF SECTIONS 17(2) AND 40A(5) BEFORE INSERTION OF CLAUSE (VI). THE CIRCULARS OF THE CENTRAL BOARD OF DIRECT TAXES ALSO PROVIDE AS TO HOW THE REVENUE ITSELF UNDERSTOOD THE EFFECT OF THE AMENDMENT AND WHAT WAS THE LAW BEFORE THE AMENDING ACT, 1984. THE ABOVE BEING THE LAW LAID DOWN BY THE APEX COURT , THE TRIBUNALS VIEW CANNOT MAINTAIN. THE QUESTIONS REFERRED, THEREFORE, HAVE TO BE ANSWERED IN THE NEGATIVE, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 18. IN VIEW OF FOREGOING DISCUSSION, WE ARE INCLINE D TO AGREE WITH THE CONCLUSION OF THE CIT(A) THAT NO AMOUNT OF LOAN /ADVANCE WAS ACTUALLY RECEIVED BY THE ASSESSEE FROM AIPL BUT IT WAS ONLY A JOURNAL ENTRY PASSED ON 31/03/2010 DEBITING THE ASSESSEES ACCOUNT AND CORRESPONDINGLY CREDITING THE UHCPL ACCOUNT TO ENHA NCE THE PROMOTERS 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). TH E SAID CONCLUSION ALSO GETS SUPPORT AND STRENGTH FROM THE RATIO OF TH E ORDER OF HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF S OHAN SINGH VS. CIT (SUPRA). WE ALSO HOLD THAT THE INTEREST FREE ADVAN CE/LOAN TO ASSESSEE FROM AHS ALSO DOES NOT ATTRACT PROVISIONS OF SECTIO N 2(24)(IV) OF THE ACT BECAUSE THIS PROVISION IS ONLY APPLICABLE TO THE CA SES WHEREIN A ITA NO. 6204/D/2013 & CO NO. 230/D/2015 17 COMPANY PROVIDES BENEFITS/PERQUISITES AND THIS PROV ISION IS NOT APPLICABLE IN THE CASE OF PARTNERSHIP FIRM SUCH AS AHS. WE ARE UNABLE TO SEE ANY INFIRMITY OR PERVERSITY OR ANY OTHER VAL ID 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 WITHDRAW THE SAME. THE ASSESS EES SUBMISSIONS ARE ACCEPTED AND CROSS OBJECTION OF THE ASSESSEE IS DISMISSED AS NOT PRESSED. 20. IN THE RESULT, THE APPEALS OF THE REVENUE AS WE LL AS CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 23/09/2 015 SD/- SD/- (L.P. SAHU) (C.M.GARG) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED: 23/09/2015 *KAVITA, P.S. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO. 6204/D/2013 & CO NO. 230/D/2015 18 DATE 1. DRAFT DICTATED ON 16.09.2015/17.09.15 2. DRAFT PLACED BEFORE AUTHOR 18.09.2015 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 21.09.2015 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 22.09.2015 5. APPROVED DRAFT COMES TO THE SR.PS/PS 22.09.2015 6. KEPT FOR PRONOUNCEMENT ON 23.09.2015 7. FILE SENT TO THE BENCH CLERK 23.09.2015 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.