TaxTMI 
TaxTMI 
1993 (3) TMI 41
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....plicability of the provisions of section 28(iv) of the Income-tax Act and sustaining the inclusion of the amount of Rs. 51,320 to the income of the assessee ?" It was the assessees who sought reference of these questions on applications filed under section 256(1) of the Income-tax Act, 1961 (for short, "the Act"). The Income-tax Appellate Tribunal, Delhi Bench, New Delhi, sent in the statement of the case to this court for its opinion on the aforesaid questions of law. At the outset, we may note that, for subsequent assessment years, the assessees succeeded in their appeals before the Appellate Tribunal and it was the Revenue which sought reference on the same questions, but the Appellate Tribunal declined its applications under section 256(1) of the Act as, in its opinion, no question of law arose for determination by this court. For those subsequent assessment years, the Revenue has filed applications under section 256(2) of the Act in this court seeking a direction to the Appellate Tribunal to state a case and to refer to this court the aforesaid question of law. The fate of those applications will depend upon the answers which we give in the present reference applications....
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....t of the debit balance in his account in the firm and, whereas, if there was no such debit balance, the benefit of the "non-interest-bearing funds" would have gone to the firm itself by way of substantial further income on investment of the same. The order of the Income-tax Officer was upheld. Further appeal was filed by the assessee before the Appellate Tribunal. The Tribunal referred to the assessment order of the firm for the assessment years 1974-75 and 1975-76 which were placed on record before it. The Tribunal found that, during the previous year relevant to the assessment year in question, total credit of Rs. 24,76,000 was shown as available to the firm on which no interest need have been paid. A sum of Rs. 22,40,000 was stated to be the total of the debit balances in the accounts of the partners including the assessees and their relatives over which no interest was charged. The Tribunal agreed with the conclusion arrived at by the Commissioner of Income-tax (Appeals) who had held that the assessee had availed of the benefit of such "non-interest-bearing funds" to the extent of the debit balance in his account in the firm and so the provisions of section 28(iv) were attracte....
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.... under section 28(iv) of the Act on account of the debit balance in the firm on which no interest had been paid. The Tribunal also refused to state the case on an application filed by the assessee under section 256(1) of the Act, and, as noted above, applications for all the subsequent. assessment years under section 256(2) of the Act are pending in this court. We may set out the relevant provisions of sections 28(iv) and 361(1)(iii) of the Act as under : "28. The following income shall be chargeable to income-tax under the head 'Profits and gains of business or profession',-..... (iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession...." "36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28- . . . . (iii) the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession ; Explanation. -Recurring subscriptions paid periodically by shareholders, or subscribers in mutual benefit societies which fulfil such conditions as may ....
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....ve borrowed less interest-carrying loans. He referred to decision of the Madhya Pradesh High Court in V. P. Warrier v. CIT [1990] 181 ITR 303. In this case, the assessee was a partner in a partnership firm carrying on business and the assessee was allowed by the firm the use of its residential premises, car and telephone. The Income-tax Officer valued these perquisites at Rs. 15,000 and added the same to the income of the assessee under section 28(iv) of the Act. In appeal, the value of the perquisites was reduced to Rs. 3,600. The court held that, on the facts and in the circumstances of the case, the Tribunal was right in holding that a sum of Rs. 3,600 was includible In the income of the assessee under section 28(iv) of the Act. We do not think that this judgment is quite relevant for our purposes as we shall presently see. In the present case, the very basis of addition under section 28(iv) falls as the Tribunal, in the case of the firm for the same assessment year, deleted the disallowance made by the Income-tax Officer which he had made on the ground that, while the firm had borrowed funds on interest, it had advanced monies to its partners without charging any interest. T....