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TMI Blog2007 (5) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. That on the facts and in the circumstances of the case and in law, the CIT (Appeals) erred in approving the ratio of decision of Hon ble Supreme Court in the case of Emil Webber v. CIT reported in 200 ITR 483 . 4. That on the facts and in the circumstances of the case and in law, the CIT (Appeals) erred in sustaining the addition of Rs. 2,05,520 being the perquisite value of interest-free loan given by SRF Employees Co. Ltd. 5. That on the facts and in the circumstances of the case and in law, the CIT (Appeals) erred in not disposing the ground relating to the penalty proceedings initiated by Assessing Officer under section 271(1)( c ) of the Income-tax Act. 6. Assessee prays for leave to add, alter, amend or vary any of the grounds either before or at the time of hearing the appeal." 2. Rival contentions have been heard and record perused. Brief facts in this case are that the assessee was the CEO and Group Head of SRF Ltd. The SRF Ltd. had, under a scheme, conferred a right in respect of certain employees to subscribe for the shares of such employer company. The eligible employees were required to pay Rs. 10 towards the value of one equity share and Rs. 5 as pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. This case is best covered by the one cited by the Assessing Officer as Emil Webber v. CIT 200 ITR 483 (SC). As regards the nature of the receipt, it may be capital when given, but it can change subsequently. With the cessation of the liability to repay because of the employment of the applicant with a group company, it cannot but assume the colour of income on such cessation. This has been clearly postulated by the Hon ble Supreme Court in the case of CIT v. T.V. Sundram Iyenger Sons Ltd. 222 ITR 344 (SC). Thus the entire amount has been tightly taxed in the hands of the assessee." 5. Aggrieved by the above order of the CIT (Appeals), the assessee is now before us. It was argued by learned AR Shri Ajay Vohra that obtaining a loan is a transaction in the capital field, the loan obtained is not income, there is no section in the Income-tax Act, 1961 which treats capital transaction as income. He further contended that under the Income-tax Act, a specific provision is made in section 41(1), which it provides that if any allowance or claim is allowed in a year in the computation of business income, then the benefit received in respect of such transaction will be dee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaken to repay the loan. He has to pay interest. Therefore, such loan transaction and the part waiver are not based on any agreement that welfare company would assist the assessee in any matter. It is only to help the assessee and the other employees to subscribe for shares. Such shares are the properties of employees only. Therefore, the circumstances in the assessee s case are not in any may similar. The Hon ble Supreme Court has only held in Emil Webber s case ( supra ) that an assessee s obligation, though met by somebody else, will be income. Therefore, such judgment is not applicable here. 6. Learned AR further explained that the Assessing Officer has wrongly held that the arrangement for the welfare company providing loan is in effect a loan on behalf of SRF Ltd. SRF has provided funds on various occasions. The welfare company has used such funds for purposes other than providing loans. A legal arrangement for SRF providing loan cannot be understood in a different way. The legal effect of the same has to be understood as SRF, the lender and the welfare company, a borrower. The Hon ble Supreme Court of India held in CIT v. B.M. Kharwar [1969] 72 ITR 603 that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on scheme was opted by the assessee in the assessment year 2000-01 and loan was also taken during this year. After two years, i.e. assessment year 2002-03, under consideration, the loan was waived and the assessee company included the amount of loan waived and notional perquisite value in respect of interest due thereon, in Form No. XVI under the head Any other item reported by the employees . Tax was also deducted at source on this amount, but the assessee did not offer this amount in its return of income for taxation. The Assessing Officer found that M/s. SRF Ltd. being employer of the assessee had advanced huge amount of loan to M/s. SRFEWC Ltd., which was in turn given as a loan to the employee of the SRF Ltd. including the assessee for subscribing the shares issued by the SRF Ltd. These shares were allotted to the assessee in the employees purchase scheme. The Assessing Officer has examined the balance sheet of SRFEWC Ltd. and found the source of loans advanced to the employees of SRF Ltd. and came to the conclusion that entire amount of loan given to the employees came to the SRFEWC Ltd. from SRF Ltd. As per the board s resolution of M/s. SRFEWC Ltd. dated 29-9-1999, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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