TaxTMI 
TaxTMI 
TaxTMI 
2025 (5) TMI 2029
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny. The AO noted that the assessee had obtained a loan of Rs. 50 Crs. from the Indian Overseas Bank (hereinafter in short 'IOB') and advanced the same as loan to M/s. KTVPL. According to the AO, the loan along with the interest was re-paid by M/s. KTVPL to the assessee, who in turn re-paid the loan along with interest to the IOB. The AO further noted that M/s. KTVPL while making payment of interest to the assessee (on the loan amount given to it by the assessee), had duly deducted tax at source on 31.03.2009 to the tune of Rs. 87,16,742/- and TDS of Rs. 7,47,633/- on 07.09.2009 [total Rs. 94,64,375/-]. The AO further noted that M/s. KTVPL had given an additional amount of Rs. 94,64,375/- to the assessee and also noted that the assessee had claimed credit of TDS amounting to Rs. 87,16,742/- in the AY 2009-10 and also claimed credit of TDS of Rs. 7,47,633/- for AY 2010-11. Thus, the AO was of the opinion that the assessee had received excess amount of Rs. 94,64,375/- from M/s. KTVPL, which amount assessee didn't offer as income in the relevant assessment year. Therefore, the assessee was asked to show cause 'as to why' provisions of Sec. 2(24)(iv) of the Act shouldn't be invoked to s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ained from M/s. IOB along with interest as shown below: Date Amount Received from KTV in Rs Date Repayment to IOB 27.04.2009 4,12,83,258/- 28.04.2009 4,12,83,258/- 18.07.2009 50,00,00,000/- 18.07.2009 50,00,00,000/- 12.08.2009 3,50,00,000/- 12.08.2009 3,50,00,000/- 17.08.2009 1,95,05,232/- 17.08.2009 1,95,05,232/- 7. And it was brought to our notice that the sum of Rs. 7,69,35,057/- was debited by M/s. IOB as interest for loans advanced during the period from 01.04.2008 to 31.03.2009. And M/s. KTVPL provided the same amount as interest payable to the assessee in their books and deducted a sum of Rs. 87,16,742/- at source @ 11.33% on 24.04.2009 and has shown the said amount as debit balance of the assessee. Since Rs. 1,88,53,433/- was debited by IOB towards interest on loans for the year ending 31.03.2010, M/s. KTVPL provided the same amount as interest payable to the assessee in their books and deducted a sum of Rs. 7,47,633/- at source @ 11.33% on 17.08.2009 and has shown the said amount as debit balance of the assessee. Thus, M/s. KTVPL has shown Rs. 87,16,742/- plus Rs. 7,47,633/- (Rs.94,64,375/-) as the debit balance of the assessee. Further, the Ld.AR drew....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thout a specific provision which was sought to be introduced by sub-clause (vi) in section 17(2) of the Act and also sub-clause (vi) of Explanation 2((b) to Section 40A(5) of the Act, the grant of loan to the employee without charging any interest did not amount to any perquisite or benefit for the purposes of section 17(2) and/or section 40A(5) of the Act. The intention of the Legislature seems to be very clear that the expression "benefit" and/or "perquisite" did not include the enjoyment of loan or credit, free of interest or at a concessional rate. This aspect has been recognised by the statute itself and to bring such items in the net of taxation, the law was amended by the Taxation Laws (Amendment) Act, 1984. By this amendment, as already indicated, a new sub-clause (vi) was inserted in Section 17(2) and, similarly, another sub-clause (vi) was inserted in clause (b) of Explanation 2 to Section 40A(5). The effect of these amendments, which were made effective from April 1, 1985, was to ensure treatment and taxation as perquisite of the value of an amount calculated on a particular basis in a case where an employee receives loan for certain prescribed purposes either free of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... not amount to a benefit or amenity falling within clause (b)(iii) of Explanation 2 to section 40A(5) of the Act. The amendment and the immediate deletion thereof manifest clearly the intention of Parliament. It is, therefore, evident that, without a specific provision which was sought to be introduced by sub-clause (vi) in Section 17(2) of the Act and also the sub-clause (vi) of Explanation 2(b) to Section 40A(5) of the Act, the grant of loan to the employee without charging any interest does not amount to any benefit for the purposes of Section 17(2) of the Act. The omission of sub-clause (vi) in Section 17(2) and also sub-clause (vi) of Explanation 2(b) to Section 40A(5) of the Act from the date of its proposed insertion also was to give relief to salaried taxpayers so that granting of loan to an employee without charging any interest would not be treated as benefit for the purposes of Section 17(2) of the Act. Section 17(2) of the Act, by an inclusive definition, sought to include loans given by an employer to its employee for purchase of a building or a site or a site with building or for purchase of a motor car without charging any interest or at a concessional rate, as p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owed monies. High Court said that ordinarily the funds borrowed by a company would fall within the hotchpot and intermingle with its own funds. High Court appears to have gone beyond the finding of the Appellate Tribunal which was not permissible. In the later cases, Karnataka High Court itself relied on the provisions of the Amendment Act, 1984 and its repeal by the Finance Act, 4985 to interpret the provisions of Sections 17(2) and 40A(5). Distinguishing features which the High Court in the case of Commissioner of Income Tax v. M.K. Vaidya, (1997) 224 ITR 186 pointed out with reference to the impugned judgment (1992) 198 ITR 738 appear to us to be rather obscure. Interpretation of law has to be uniform. Thus having regard to the dismissal of the appeal of the revenue in Civil Appeal No. 424 of 1999 and state of law as interpreted by us, particularly, keeping in view the amendment by the Taxation Laws (Amendment) Act, 1984 and its repeal by the Finance Act, 1985 and the circulars of the CBDT we answer the questions in affirmative, i.e., in favour of the assessee. Accordingly Civil Appeal No. 657 of 1994 is allowed and Civil Appeal Nos. 4012-13 of 1998 dismissed. There shall, h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s occurring in the body of the statute, it is a cardinal rule of interpretation that if, by an inclusive definition, the meaning of the word is to be enlarged, it would receive a strict interpretation. It is also cardinal rule a construction of a fiscal statute that, even if two views are possible, the view which is favourable to the assessee must be accepted while construing the provisions of a taxing statute. For the reasons aforesaid, the non-charging of interest on the amount overdrawn in the relevant year cannot be treated as a benefit for the purposes of section 17(2)(iii) of the Act." Taxation Laws Amendment Act, 1984 which amended Sections 17(2) and 40A(5) by inserting clause (vi) in both the sections and its subsequent repeal by the Finance Act, 1985 is significant. By the 1984 Amendment Act, Parliament wanted to carve out a particular exception from otherwise exclusionary clauses for the purpose of computation of income tax. This provided a clear direction to interpret the provisions of Sections 17(2) and 40A(5) before insertion of clause (vi). The circulars of CBDT were also provided as to how Revenue itself understood the effect of the amendments and what was the law ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... benefit or perquisite u/s. 2(24)(iv) of the Act. Therefore, definition of perquisite needs to be looked into which is given u/s. 17(2)(iv) of the Act which reads as under: Sec.17(2) "perquisite" includes - (i) ..... (ii) ..... (iii) ...... (iv) any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee; 10. Sec. 2(24)(iv) defines 'income' which includes: i) ..... ii) ..... iii) .... iv) the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by a person who has a substantial interest in the company, or by a relative of the director or such person, and any sum paid by any such company in respect of any obligation which, but for such payment, would have been payable by the director or other person aforesaid ; 11. On conjoint reading of sec. 2(24)(iv) & sec. 17(2) of the Act, we find that the AO erred in making the addition for the simple reason that he was under the mistaken assumption of fact that the company-employer (M/s. KTVPL) has made the payment of Rs. 94,64,375/- to discharge the obligation of the assessee with IOB. Ho....