CIT-I CHANDIGARH V. SARANPAL SINGH

ITA/294/2010

AI Insights

The case involves an appeal by the Commissioner of Income Tax-I, Chandigarh against Saranapal Singh, HUF, concerning the taxability of an amount received as a loan under Section 56(2)(v) of the Income Tax Act, 1961. The Assessing Officer had initially treated the loan as income, but this was overturned by the CIT(A) and upheld by the Tribunal. The Tribunal's decision was based on the understanding that the loan, being a liability with a repayment obligation, does not qualify as income 'without consideration' as contemplated under Section 56(2)(v). The High Court, after hearing the arguments, agreed with the Tribunal's interpretation and dismissed the appeal.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 689754 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 06-10-2010
• Assessment Year: misc
• Other Referred Cases: Chander Kant H. Shah, 19 DTR 241 (Mum)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RAVI SHANKER
• Assessee Lawyers: URVASHI DHUGGA
• Keywords: Bogus gifts; Income Tax; Loan; Taxable income; Unsecured loans
• Section: 260A; 56(2)(v)

Judgement Text

"Income-tax Appeal No. 294 of 2010 -1- *** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Income-tax Appeal No.294 of 2010 Date of decision: 6.10.2010 The Commissioner of Income Tax-I, Chandigarh ...Appellant Versus Saranapal Singh, HUF ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Ms. Urvashi Dhugga, Advocate for the appellant. Mr. Ravi Shanker, Advocate for the respondent. **** ADARSH KUMAR GOEL, J ( Oral) . 1. This appeal has been preferred under Section 260A of Income Tax Act, 1961 (hereinafter referred to as 'the Act”) proposing following substantial question of law arising out of order dated 9.9.2009 of the Income Tax Appellate Tribunal, Chandigarh Bench 'B', Chandigarh (hereinafter referred to as “the Tribunal”) passed in ITA No.892/Chandi/2009 in respect of assessment year 2006-07:- “Whether, on the facts and in the circumstances of the case, the Hon'ble ITAT has erred in affirming the order of the CIT (A) Chandigarh in view of the decision of Hon'ble ITAT, Mumbai Bench in the case of Chander Kant H. Shah, 19 DTR 241 (Mum) by holding that the intention of Section 56(2) (v)is to tax cases of bogus gifts-whereas actually no word like gift has been used in the said Income-tax Appeal No. 294 of 2010 -2- *** section of the Income Tax Act, to suggest that these provisions pertain to gifts only?” 2. The Assessing Officer made addition to the returned income on account of amount received as loan which was treated to be receipt within the meaning of Section 56(2)(v) of the Act. On appeal, the CIT(A) set aside such addition which was upheld by the Tribunal. The Tribunal observed in para 9 as under:- “Apart from the aforesaid, in so far as the present case is concerned, there is no dispute regarding the nature and source of the impugned unsecured loans. The nature of the amounts having been received as unsecured loans and the sources thereof, is not in doubt. The assessee had also explained that such unsecured loans have been repaid within a short period and the purpose of raising the loans was also explained before the Assessing Officer. The Assessing Officer has not doubted any of the aforesaid features of the transaction but has merely observed that since the unsecured loans were raised free of interest, it constituted receipt of money 'without consideration' and therefore he proceeded to invoke Section 56(2)(v) of the Act. In our considered opinion, the factum of the assesee being liable to repay the impugned unsecured loans, imbibes the same with characteristics of a liability. Merely because the amount of loan has been raised without involving payment of interest, cannot be Income-tax Appeal No. 294 of 2010 -3- *** seen to have vested the impugned amount with characteristics of an income, within the meaning of Section 56(2)(v) of the Act. The existence of the expression “without consideration” in Section 56(2)(v) cannot distract from the fact that in the impugned case, the sum of money received in question carried a liability of its repayment and the same was not received by the assessee with an absolute unfettered right of possession. Therefore, in the totality of circumstances of the prsent case, we find no justification to uphold the stand of the Assessing Officer and the CIT (Appeals) was justified in deleting the impugned addition. Accordingly, the conclusion of the CIT (Appeals) is affirmed.” 3. We have heard learned counsel for the parties. 4. Learned counsel for the appellant submits that scope of Section 56(2)(v) is very wide which included any amount received by the assessee unless the same was covered by the proviso. 5. We are unable to accept the submission. 6. The amount contemplated under Section 56(2(v) of the Act cannot include loan which is shown to have been repaid. In the facts and circumstances of the present case, a concurrent finding of fact has been recorded that the amount received was a short term loan which was duly repaid. The said amount cannot be treated as income of the assessee under Section 56(2)(v) of the Act. Thus, no substantial question of law arises. Income-tax Appeal No. 294 of 2010 -4- *** 7. The appeal is consequently dismissed. (Adarsh Kumar Goel) Judge October 06,2010 (Ajay Kumar Mittal) Pka Judge "