AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (11) TMI 422
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....Amrapali Group of cases, which, inter-alia, include the assessee Shri Anil Kumar Sharma who is Chief Managing Director of M/s Ultra Home Construction Pvt. Ltd. (for short UHC), the flagship company of the group. The case of the present assessee was centralized/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/Centralization/2011-12/88 dated 07.04.2011. The assessee filed original return u/s 139 of the Act by way of e-filing on 03/03/2011 declaring an income 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 additions viz. income on account of benefit/perquisite u/s 2(24)(iv) of the Act pertaining to M/s AHS Joint Venture (AHS) and income on account of benefit/perquisite pertaining to M/s Amrapali Infrastructure Pvt. Ltd. (AIPL) assessed the taxable income at Rs. 5,31,83,754/- by making total addition of Rs. 2,28,27,650/- under the said provision. 3. Being aggrieved by the above assessment order, the assessee filed an appeal before the CIT(A) which was allowed by passing the impugned order and the AO was directed to delete both the add....
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.... drawn our attention towards assessee's paper 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 received by the assessee from M/s AHS Joint Venture it is ample clear that there is no payment by M/s UHCPL to AHS which can be linked even remotely 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 inapplicable to the present case. 8. The ld. AR further pointed out that regarding amount of Rs. 1,94,21,420/- received from Amrapali Infrastructure Pvt. Ltd. from the ledger account it is clear that no amount was actually received but it was only a general entry passed at the end of the year i.e. 31/03/2010 debiting the appellant (assessee) account by an amount of Rs. 32,40,90,344/- and correspondingly crediting the UHCPL account to enhance the promoters contribution in the joint venture project between AIPL & UHCPL. The ld. AR further submitted that this book entry was made to facilitate bank finance for the project and does not have any tax implication and hence....
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....e 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 appellant's case are money transactions and, therefore, there is no applicability of section 2(24)(iv). Section 2(24)(iv) deals with any "benefit" or "perquisite" whether convertible into money or not. Thus, it cannot be "money" itself because if it is money, the question of its convertibility into "money" or "not" will not arise. The section speaks of value of any perquisite or benefit. 2.1 In the case of CIT vs. G. Venkataraman (1978) 111 ITR 444 (673) (Mad.), the Hon'ble High Court while considering the provisions of section 2(24)(iv) {corresponding section 2(6C)(iii) of Indian Income Tax, 1922} held as under: - "There are two aspects of the matter to be considered 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 money or not". From this language it is clear that the "benefit or perquisite" contemplated cannot be money itself. If it is money, the question of its va....
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....ection 28(iv) would apply. 2.3 In the case of CIT Madhu Gupta (2012) 303 Taxman 303 (P&H) the Hon'ble 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 Hon'ble Delhi Bench of ITAT vide its order dated 27.08.2013 held that granting of interest free advances cannot be treated as benefit or perquisite. 3. There is yet another reason because of which the additions made by the AO is not sustainable. The value 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 appellant's case before your honour, because of the interest free advances received by the assessee company, there has been no cost incurred/no loss suffered by AHS Joint Venture or Amrapali Infrastructure Pvt. Ltd. as they had the availability of interest free funds with them. The AO has himself admitted in para 6.2 of the assessment or....
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....since there is no case of receipt of any amount by the appellant from AIPL there is no question of any perquisite/benefit accruing to the appellant. As can be seen from the ledger account of appellant in the books of AIPL, the same is on account 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 appellant have been doing real estate projects. The individual promoters being, fountain heads of the group, are required to be involved in the projects by the bankers and other stakeholders. Since no money has come into the bank account of assessee, there is no question of any benefit 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 from AIPL is liable to be deleted is that the transaction being commercial transactions, there is no case for applicability of section 2(24)(iv) of the Income Tax Act, 1961. It has been duly explained to AO that the transactions and balance outstanding as advance were in relation to property/project. The AO has however, brushed aside th....
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....egard 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 of the interest free loan of Rs. 5,67,70,500/- from M/s AHS Joint Venture 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 calculating 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 applicable in the case of partnership firm and the same are applicable only in 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 31/03/2010 it is apparent that there was no transaction during the financial period and the amount of opening balance at the beginning of the year remained same at the end of the financial period which has been shown as c....
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....made to facilitate bank finance for the project and does not have any tax implication as wrongly noted by the AO. 15. On careful consideration of above submission and facts and circumstances of the present case, we observe that section 2(24)(iv) of the Act deals with any "benefit" or "perquisite", whether convertible into money or not. Therefore, obviously and necessarily there must be some cost/loss incurred/suffered by the company. In the present case the AO has himself admitted in para 6.2 of the assessment order that the interest free funds advance shown from the company to the assessee apparently do not fetch interest cost. At the same time, we also observe that from the copy of the ledger account 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 general debit entry on 31/03/2010 amounting to Rs. 32,40,10,344/- and there was no actual transfer of any funds/advance/loans. 16. When we consider the ratio of the judgment of Hon'ble Punjab & Haryana High Court in the case of CIT vs. Madhu Gupta (supra), we note that their lordships held that interest on interest free loans availed by the assessee from a co....
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....hem of no consequence Act." 10. At this stage, we may notice that section 17 falling in Chapter IV deals computation of income under the head 'salary'. Section 17(2) defines 'perquisite' for the purposes of sections 15 & 16 and for the purposes of section 17, whereas section 40A contemplates that the computation of income under the head "Profits and gains 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 provisions of section 40A(5) prior to its omission, deal with expenditure resulting directly or indirectly in the provision of any perquisite whether convertible into 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) and effect of amendment in section 40A(5) would be applicable to the expression 'benefit and perquisite' appearing in section 2(24)(iv) as well as is observed by Calcutta High Court. The judgment of Calcutta High Court in P.R.S. Oberoi's case (su....
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....red 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, 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 i....