2019 (1) TMI 2001 - AT - Income Tax

Benefit/perquisite u/s. 2(24)(iv) - additions as on account of notional interest - As argued assessee has neither received any interest income nor any interest income has accrued to it. It is only a real income that can be brought to tax. In the absence of any real income, there could be no taxability. The addition made by the A.O. are of hypothetical income and not of any real income - HELD THAT - The matter requires reconsideration at the level of the A.O. The Ld. CIT(A) in this case following his Order for the A.Y. 2010-2011 allowed the appeal of assessee. The Ld. D.R. however filed copy of the Order of the Tribunal 2018 (3) TMI 1575 - ITAT DELHI Dated 26.03.2018 in the case of same assessee in which for A.Y. 2009-2010 2018 (3) TMI 1575 - ITAT DELHI , the Tribunal has considered the similar issue in Departmental Appeal on Ground No.3 - On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made by the A.O. on account of benefit of perquisite under section 2(24)(iv) of the I.T. Act, 1961 Following the reasons for decision of the Coordinate Bench of the Tribunal, we set aside the Orders of the authorities below and restore the matter in issue to the file of A.O. for reconsideration as is directed by the Tribunal vide Order dated 26.03.2018 2018 (3) TMI 1575 - ITAT DELHI Appeal of the Department is Allowed for statistical purposes.

Summary

Issues:
Appeal against order of CIT(A) for A.Y. 2011-2012; Addition of income as benefit/perquisite u/s. 2(24)(iv) challenged; Cross-objection filed in support of CIT(A)'s order.

Analysis:
1. The Departmental Appeal and Cross-objections were filed against the CIT(A)'s order for A.Y. 2011-2012. The appeal contested the deletion of addition of Rs.4,73,53,263 made by AO as benefit/perquisite u/s. 2(24)(iv) of the Income Tax Act, 1961.

2. The AO had made two additions under section 2(24)(iv) of the IT Act, one related to M/s. AHS Joint Venture and the other to M/s. AIPL. The Assessee challenged these additions before CIT(A), arguing that no real income was involved and no benefit or perquisite had been received.

3. The CIT(A) deleted the additions based on the explanation provided by the Assessee. CIT(A) observed that the provisions of section 2(24)(iv) were not applicable in the case of a partnership firm, and the additions were not warranted as they were on account of notional interest or commercial transactions.

4. The Department contended that a similar issue had been considered by ITAT in a previous year and was remanded to the AO for reconsideration. As the Assessee did not appear during the hearing, the matter was deemed to require reconsideration at the AO level.

5. Considering the Tribunal's direction in the previous case, the ITAT set aside the orders of the lower authorities and restored the matter to the AO for reconsideration. The Departmental appeal was allowed for statistical purposes, while the Cross-objection was dismissed as it became infructuous due to the setting aside of CIT(A)'s order.

6. The judgment highlights the importance of establishing a nexus between income received and tax liability, emphasizing the need for real income to be taxed rather than hypothetical amounts. The decision underscores the legal principles governing the taxation of benefits and perquisites under the Income Tax Act, ensuring proper application of the law in determining tax liabilities.