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TMI Blog2007 (7) TMI 436X X X X Extracts X X X X X X X X Extracts X X X X ..... of perquisite value of interest on interest-free loan received by the assessee from his employer disregarding the fact that the transaction of the assessee s employer having advanced an interest-free loan to the assessee for purchase of flat was discovered only as a result of the search conducted in this case." 2. The assessee, an individual, was working as Vice-President (Production) with M/s. Pearl Engineering Polymers Ltd. (PEPL), Mumbai since 1-12-1995. He was earlier working with Pearl Polymers Ltd., a company, which promoted PEPL. Search and seizure operation under section 132 of the Income-tax Act was carried out at the residential premises of the assessee on 6/7-11-1997 during the course of which certain documents in the form o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest charged by the banks is about 12 per cent. Accordingly, the perquisite on account of interest is worked out and taxed in the hands of assessee on the basis of reduced balance outstanding against the assessee. For assessment year 1996-97 the interest on the above loan after deducting Rs. 4,50,000 refunded by the assessee to the company works out to Rs. 1,60,000 for assessment year 1997-98 Rs. 2,50,250 and assessment year 1998-99 (up to 7-11-1999). As this fact i.e. interest-free loan granted by the assessee s employer is not disclosed to the Department either by the employer or the assessee the interest worked out above is treated as undisclosed income of the assessee for assessment years 1996-97 to 1997-98." 3. In view of the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t-free loan given by M/s. Pearl Polymers Ltd. was recovered and seized during the course of search operation. It was on the basis of the aforesaid seizure that post search enquiries were carried out. She submit-ted that the basic document was recovered and seized at the time of search and hence the impugned addition was rightly made by the Assess-ing Officer in the block assessment of the assessee. Her second submission was that Pearl Polymers was the promoter company of PEPL and also that the assessee was employed with M/s. Pearl Polymer Co. prior to his taking up the job with PEPL. According to her, the Assessing Officer was right in taking into account the aforesaid fact and in valuing the perquisite arising out of the interest-free loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is decisive. The mere fact that the assessee could obtain the loan from the promoter-company, which employed him earlier, instead of the employing company promoted by the said promoter-company, would not alter the position. It is as good as the assessee has obtained the interest-free loan from his employer. 8. It is during the course of search that the purchase deed was seized after which post search enquiries were made. Neither the interest received from Ratnesh Enterprises nor the value of perquisite arising out of interest-free loan taken by the assessee from his employer was ever disclosed to the Department. The fact that it was recorded in the accounts maintained by the assessee with the Bank would not mean that the transaction or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -search inquiries. It cannot therefore be said that the present addition is bereft of any seized material. 9. Section 17(2) contains inclusive definition of "perquisite". It is well-settled that the word in respect of which "includes" is used bears both its extended statutory meaning and also its ordinary, popular and natural sense. Loan of Rs. 30 lakhs received from the employer is interest-free which means that it has a cost in the form of interest, which the employer has decided not to charge. It does not mean that such a loan has no cost or value in terms of interest. If the assessee had raised this loan from the open market, he would have had to pay interest. Likewise, the employer would also have received interest on the loan if i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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