TaxTMI 
TaxTMI 
2004 (8) TMI 316
X X X X Extracts X X X X
X X X X Extracts X X X X
....nses without appreciating the fact that the type of business being carried out by the assessee hardly needs supporting staff." 2. During the assessment proceedings, the AO noticed that the assessee has given loans to the following close relatives: 31-3-1996 31-3-1997 Rs. Rs. "1. Nalin M. Shah, HUF (A's HUF) 2,85,949 3,04,949 2. Shefali N. Shah, daughter 3,88,508 1,24,225 3. Sugnaben N. Shah, wife 3,37,601 3,97,717 4. Sujata N. Shah, daughter 2,20,195 2,43,195" The AO further noticed that the assessee did not show any interest on these amounts due from relatives and HUF. The above said amounts were invested by the respective persons from which they earned income....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tified and is deleted herewith." 3. The learned Departmental Representative supported the order of the AO and submitted that the AO has correctly invoked provisions of s. 60 as the assessee has transferred the cash in the form of loans to the relatives. The assessee did not charge any interest whereas those relatives earned the income. The learned Authorised Representative on the other hand supported the order of the CIT(A) and submitted that the AO has wrongly applied s. 60 of the IT Act. Sec. 60 laid down a declaratory principle. A transfer of income alone without there being a transfer of the source of that income is mere application of the income. The object underlying the provisions of s. 60 is to meet with the device which was bein....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t observations are reported as under: "The Court further held that the interest income did not accrue to beneficiaries by virtue of the transaction of the loan, but it accrued to them by virtue of subsequent transactions of their having invested the amounts. It is, therefore, clear that the provisions of s. 60 of said Act could not have been invoked by the Revenue for assessing the income of the beneficiaries in the hands of the assessee-trust. The Tribunal was, therefore, justified in holding that the provisions of s. 60 were not applicable to the facts of the present case." The learned Authorised Representative submitted that the assessee was having sufficient interest-free fund in the form of capital of Rs. 13,62,429 and the advanc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld be regarded as the income of the transferor and assessed as such. This fiction would operate only when the asset which produces the income still remains the property of the transferor, while the income belongs to the transferee. For this purpose we would like to refer the judgment of Hon'ble Gujarat High Court in the case of CIT vs. Manharlal Girdharlal Doshit and in the case of CIT vs. H.H. Maharaja Family Trust. After considering the totality of the facts of the case, we find that it is simply a case of interest-free loans and advances given by the assessee to his relatives. We find that s. 60 is not applicable under the facts and circumstances of the case as it is not a case where the income has been transferred without transferring t....