TaxTMI 
TaxTMI 
1981 (2) TMI 112
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....or the asst. yr. 1976-77 that the assessee company had advanced interest free loans to its directors and shareholders amounting to Rs. 2,46,251. The assessee was asked to explain as to why interest free loans were given to the directors and shareholders while they themselves were making borrowals from the market. It was explained to the ITO by the assessee that the interest free loans were advanced to the directors and shareholders as a sort of compensation in lieu of remuneration. It was urged before the ITO that advancing interest free loans are small facility to the directors who had account with them. This plea was not accepted by the ITO for the asst. yr. 1976-77. He charged the dues at 18 per cent of Rs. 2,46,251 for the asst. yr. 197....
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.... to withdraw the money, it is manifest that a person in charge of the company even though he has a 25 per cent has been allowed to divert funds for his personal purpose and that in respect of such funds such a person is not charged interest because he is in the driver's seat and if this is to be accepted it would mean that a person is able to utilise income without payment of tax. In this background I upheld the ITO's action. As regards the rate of interest I find merit in Mr. Mehta's submission. Thus, according to him it will be proper to consider the net average debit balance in Chandarana's two accounts for the two years under consideration. On that basis I find that the net average debit balance in Chandarana's account respectively, is ....