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Issues:
Assessment of benefit derived by a director from interest-free advance received from a company under section 2(24)(iv) of the Income-tax Act, 1961. Analysis: The judgment revolves around the assessment of a director who received an interest-free advance of Rs. 1,05,000 from a company. The Income Tax Officer (ITO) contended that the director derived a benefit by not paying interest on the advance, thus bringing Rs. 15,238 to tax under section 2(24)(iv). The Appellate Authority Commissioner (AAC) held that the director withdrew the amount without proper authorization, but the ITO's assessment was unjustified. The Revenue appealed this decision. The departmental representative argued that the interest-free advance constituted a benefit assessable to tax under section 2(24)(iv). The representative cited case law to support the position that lack of board resolution does not negate the benefit derived by the director. In contrast, the director's counsel contended that an unauthorized advance cannot be considered a benefit or perquisite. They relied on case law emphasizing the necessity of a legal or equitable claim for a benefit or perquisite. The judge analyzed the situation and concluded that the director did derive a benefit by receiving the interest-free advance. Despite the lack of a board resolution, it was implied that the company authorized the advance. The judge referenced similar cases where benefits were deemed to have been received even without formal resolutions. Therefore, the judge upheld the ITO's assessment and overturned the AAC's decision to delete the tax liability. The judge distinguished cases involving the use of company assets, like cars, from the current scenario of an interest-free advance. By following established case law principles, the judge ruled in favor of taxing the benefit derived by the director. The judge set aside the AAC's decision and reinstated the ITO's assessment of Rs. 15,238 as taxable income. The judge also clarified that a previous tribunal order had no relevance to the current case. Ultimately, the appeal was allowed in favor of taxing the benefit derived by the director from the interest-free advance received from the company.
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