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TMI Blog2009 (1) TMI 539X X X X Extracts X X X X X X X X Extracts X X X X ..... portunity was granted by the Assessing Officer to the assessee before making such addition. We are also of the view that it cannot be a case of assessee s un-accounted or undisclosed income being brought into the hands of the assessee as loans because even according to Revenue Authorities the assessee is not a person of sound financial status. - We are, however, unable to find any material being brought on record by the revenue to support these findings, hence, the orders of Revenue Authorities appear to be passed on assumptions and presumptions and, particularly, when apparently, there exist no provision in the section 56(2)(v) to treat loans, which may not be repaid, as income of the assessee. we consider it pertinent to refer to provisions of section 4(1)( b ) of the erstwhile Gift-tax Act, 1958 which provided for deemed gift in case consideration for a transfer was not paid or not intended to be paid and also to provisions of section 4(1)( c ) of that Act which provided for deeming a gift made by the person who was respon- sible for the release, discharge, surrender, forfeiture or abandonment of any debt, contract or actionable claim or of any interest in property by any person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also rejected. That charging of notional interest perquisite in the hands of the assessee in case the sum so received was not held as chargeable u/s 56(2)( v ) - as there is no relationship of employee and employer between the assessee and the lenders and the same is rejected accordingly. To treat the impugned sums as deemed dividend in the hands of the assessee, however, as stated by the learned counsel at bar that the assessee was not a substantial shareholder in such company as it was holding shares, hence, we hold that the provisions of section 2(22)(e) are not applicable. Accordingly, we reject this contention of the revenue also. Assessee has also taken two other contentions i.e. without expressed desire of the parties to a contract the colour of transaction could not be changed unless there was some material to show that whatever was apparent was not real - In this regard, we find that AO has merely doubted the nature of transaction for the reason that there was no re-payment obligation, however, this conclusion has been arrived merely on the basis of the financial status and association of the assessee with the lenders and except for this, no other material h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... athak for the Respondent. ORDER V.K. Gupta, Accountant Member. - This appeal, filed by the assessee, is directed against the Order of the ld. CIT(A), Mumbai, dated 27-5-2008 for the assessment year 2005-06. 2. We have heard the submissions made by both the sides and have also perused the material on record. 3. Ground No. 1 is general. As such, no specific decision is called for thereon. 4. Ground No 2, relating to taxation of long-term capital gain, was not pressed, hence, dismissed as not pressed. 5. In Ground No. 3, the assessee is aggrieved by the decision of the ld. CIT(A) in confirming the action of the Assessing Officer in treating the loans taken by the assessee from 4 parties as income chargeable to tax under section 56(2)( v ) of the Income-tax Act,1961 (hereinafter called Act ). 6. The facts, in brief, are that the Assessing Officer from the perusal of the Balance Sheet noted that the assessee had taken loans from the following parties: ( a ) M/s. Nirmal Developers Rs. 5,60,000 ( b ) M/s. Utkantha Trading Co. Rs. 7,00,000 ( c ) M/s. Nirmal Lifestyle Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which showed that the Assessing Officer had made wrong presumption: Sr. No. Paid to Amount (Rs.) Date 1. Utkantha Trading 7,00,000 29-3-2007 2. Mayank Enterprises 2,40,000 11-12-2007 3. Nirmal Developers 5,60,000 11-12-2007 It was also brought to the notice of the ld. CIT(A) that provisions of section 56(2)( v ) came into operation only after 1-9-2004, whereas a sum Rs. 27,70,000 , out of such loans, had been received prior to that date, hence, this could not be covered under the provisions of section 56(2)( v ). It was also argued that it was only a case of loan and not of a gift; hence, the same could not be converted into a transaction of gift without any express desire on the part of both parties to that effect. The ld. CIT(A) held that such loan transactions were abnormal in a sense that there was no interest or any repayment stipulation, hence, the said sums were without consideration. As regards the loans taken before 1-9-2004, the ld. CIT(A) held that it was claimed only before him and no such stand taken by the assessee before the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the notice of the ld. CIT(A) but instead of giving any finding or relief to the assessee, he merely ignored the same because these facts were not brought on record during the course of assessment proceedings which was not possible because the assessee did not envisage the application of the provisions of section 56(2)( v ) in view of the facts stated earlier. The Learned Counsel also contended that since the genuineness of the loans, was not in doubt; hence, the provisions of section 68 were not invoked. The Learned Counsel, thereafter, contended that the assessee was having no relationship with the said persons except the working association; hence, how an unrelated person could receive the gift. The Learned Counsel further explained that it was a mutually beneficial transaction and the said builders were able to sell the flat built by them by providing finance to the assessee and it was a common practice amongst all the builders, hence, it was not unusual or exceptional transaction. After emphasizing on the fact that it was a case of loan transaction, he contended that though no interest was payable thereon, however, the same was in-built in the price of flat, hence, it coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d between them and it was not open for any Court of Law to interpret any contract in a manner not warranted by its terms and if it was done so, then, it could amount to take upon oneself, the duty of making a new contract for the parties, hence, in the facts and circumstances of the present case, loan transaction could not be converted into gift without expressed consent of the parties. In this regard, he placed reliance on the decision of the Bombay High Court in the case of M.M. Breweries Ltd. v. Oceanic I E Corpn. [1980] Mah. LJ 303 and also on the following judicial decisions: ( i ) Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC) ( ii ) Sona Electric Co. v. CIT [1985] 152 ITR 507 (Delhi) and ( iii ) Jalan Timbers v. CIT [1997] 223 ITR 11 (Bom.). He further contended that the term loan meant delivery by one party to and receipt by another party a sum of money upon agreement expressed or implied condition, to repay it with or without interest and submitted a copy of Legal Lexicon Page 2776 to substantiate the above claim. He, accordingly, contended that, thus, it was not necessary that there must be some interest to make a transaction of lending of money, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer, hence, it could be said that the assessee intentionally did not reveal true facts. It was also contended that it was a case of interest-free loans and, thus, the said loans were without consideration, hence, the same clearly fell within the provisions of section 56(2)( v ) of the Act. The ld. Departmental Representative also contended that language of this section was very clear, hence, there was no necessity of referring to the Hon ble Finance Minister s speech. The ld. Departmental Representative also contended that the earlier loans had been repaid by obtaining fresh loans from the connected parties, hence, the same money was, in sum and substance, circulated in different form and this fact strongly supported the view taken by the Revenue Authorities. The ld. Departmental Representative further contended that it was incumbent upon the assessee to prove that obligation to repay the sum existed at the time of receipt of money and there should have been some time schedule also for repayment and in the absence of a written agreement, this fact remained unsubstantiated. He also contended that the evidences relating to repayment were additional evidences; hence, the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Assessing Officer, vide its Notice under section 142(1) dated 6-11-2006, required the assessee to furnish the copy of the Agreement for Purchase of Flat along with the sources thereof which was not complied with, hence, the Assessing Officer issued another Notice on 24-1-2007. The assessee, vide its Letter dated 13-2-2007, submitted copy of the Agreement for purchase of flat and also stated that the possession of the said flat was taken in the financial year 2006-07. It was also stated that payment for purchase of flat was made out of loans so received and for which confirmatory letters were also submitted. The Assessing Officer vide its Letter dated 23-5-2007 made further enquiries in respect of the loans taken by the assessee from M/s. Nirmal Lifestyle and M/s. Utkanth Trading Corporation, which was submitted by the assessee vide its Letter dated 28-6-2006. The assessee vide its Letter dated 9-8-2007 also explained to the Assessing Officer regarding the nature of extra payment to the builder against the sale consideration of Flat. Thereafter, the Assessing Officer has not issued any other notice, as is evident from the VI paragraph of the assessment order. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer has held that the assessee was not under an obligation to repay the loan and the ld. CIT(A) has also confirmed the addition for this reason as well as for the reason that the assessee had no assets/business plans to repay the loan. We are, however, unable to find any material being brought on record by the revenue to support these findings, hence, the orders of Revenue Authorities appear to be passed on assumptions and presumptions and, particularly, when apparently, there exist no provision in the section 56(2)( v ) to treat loans, which may not be repaid, as income of the assessee. In this regard, we consider it pertinent to refer to provisions of section 4(1)( b ) of the erstwhile Gift-tax Act, 1958 which provided for deemed gift in case consideration for a transfer was not paid or not intended to be paid and also to provisions of section 4(1)( c ) of that Act which provided for deeming a gift made by the person who was respon- sible for the release, discharge, surrender, forfeiture or abandonment of any debt, contract or actionable claim or of any interest in property by any person without bona fide reasons to the extent of value of such release, discharg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enuineness of transactions have been proved. Hence, in our view, a loan transaction has to be treated as a loan transaction only and it should be examined in the light of provisions of section 68 and not under provisions of section 56(2)( v ) of the Act and for this reason alone, this addition is liable to be deleted. 11.2 Now we would look into the objectives of the provisions of section 56(2)( v ) of the Act and the provisions itself. For this purpose, we consider it pertinent to reproduce the Speech of the Hon ble Finance Minister while introducing these provisions as under: "102. Hon ble Ministers are aware that I abolished the Gift Tax in 1997. That decision remains, but a loophole requires to be plugged to prevent money laundering. Accordingly, purported gifts from unrelated persons above the threshold amount of Rs. 25,000 will now be taxed as income. Gift received from blood relations, lineal ascendant and lineal descendants, and gifts received on certain occasion like marriage will be totally exempted." Provisions of section 56(2)( v ), as applicable at the relevant point of time, are also reproduced as under: "( v )where any sum of money exceeding twenty-five t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means, may legally be forced to actually repay the same, if the lender proceeds to do so no person would like to adopt such risky medium unless both entities are very closely related and controlled by same group. The Finance Minister has also emphasized on the fact of a loophole existing due to abolition of the Gift Tax Act, 1958, and, thereafter, words money laundering have been used in his speech, hence, the intention is only to prevent money laundering by way of bogus gifts. The Hon ble Finance Minister has made this intention clear by referring to the Gift Tax Act, 1958, and by adding exception for gift received from relatives on the occasion of marriage etc. It is also noteworthy that like gift tax, the basic exemption limit has also been prescribed in the section and various exceptions provided in section 56(2)( v ) of the Act which were also existing in the like fashion in the erstwhile Gift Tax Act, 1958, and this fact also leads to a conclusion that only bogus gifts are also brought to tax under this provision. We also find that 3 more exceptions have been added subsequently and though, these cannot be characterized as of the nature of gift as is understood generally. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of persons from assets transferred directly or indirectly or after 1-6-1973, otherwise than for adequate consideration, to the person or association of persons by such individual, to the extent to which the income from such assets is for the immediate or deferred benefit of his son s wife." Gift Tax Act, 1958: "2. "gift" means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money s worth, and includes the transfer or conversion of any property referred to in section 4. deemed to be a gift under that section. Explanation . A transfer of any building or part thereof referred to in clause ( iii ) , clause ( iiia ), or clause ( iiib ) of section 27 of the Income-tax Act by the person who is deemed under the said clause to be the owner thereof made voluntarily and without consideration in money or money s worth, shall be deemed to be a gift made by such person." 11.7 From a perusal of the provisions of section 2( xii ) it is apparent that a transfer without consideration in money or money s worth attracts the charge of gift tax and under aforesaid clauses of section 64 transfer witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded they give a loan without interest to him and the lenders accept this proposal of the assessee, hence, the assessee becomes a promisor and the lenders become promisee and No. 2 the lenders may offer to sell the flat to the assessee and the assessee accepts the same subject to the condition that interest-free loan would be given by the lenders to the assessee to purchase the flat. In this situation, lenders are promisors and the assessee is the promisee. Now, we have to look the provisions of section 2( d ) of the Indian Contract Act, 1872, which defines the term "consideration" as under: "When at the desire of the promisor, the promisee himself or through any other person has done or abstained from doing or does or abstains from doning or promises to do or to abstain from doing something, such act or abstinence or promise is called consideration for the promise." Thus, this section defines what is consideration for a promise i.e., it is an act or forbearance or promise done or given at the request of the promisor by the promisee or any other person. The basic purpose of the doctrine of consideration is to put some legal limits on the enforceability of agreements and to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a the assessee has gained by way of interest-free loan and the lenders have suffered by or giving interest-free loans and such suffering has got some value and, therefore, the said transaction cannot be said to be without consideration. There is another very important aspect of the matter i.e. , lenders have sold the flat to the assessee. In that sale consideration, they have earned profit because it is nobody s case that the flat to the assessee has been sold at cost and, therefore, lenders have also derived some benefit which has got value and, therefore, the same forms consideration for giving interest-free loans to the assessee. 11.9 There can also be raised a contention that the lenders who though had interest in the concern, which actually built and sold this flat to the assessee, but such lenders did not derive any benefit directly or indirectly which could be measured in specific monetary terms, hence, to that extent the transaction can be said without consideration. In this regard as well as on other aspects relating to the term "consideration", we find that Hon ble Bombay High Court in the case of Keshub Mahindra v. CGT [1968] 70 ITR 1, after examining the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of right shares renounced in favour of Willys were chargeable as gifts within the meaning of section 2( xii ) of the Gift-tax Act as being without consideration in money or money s worth ? (2) If the answer to the first question is in the affirmative, whether the amounts in question were exempt from Gift-tax under section 5(1)( xiv ) of the Gift-tax Act ?" The relevant findings of the Hon ble Bombay High Court are as under : "We have referred to this artificial definition of the meaning of the word "gift" by including therein "deemed gift", because it serves to emphasise by contrast what is the real definition and to crystallize the point arising in this reference. The artificial definition is not invoked in the present case. Section 4 is not attracted because it is not the case of the department that the transfers in the present case were "otherwise than for adequate consideration", nor is it the case of the department here that the consideration has not passed or was not intended to pass either in full or in part from the transfer to the transferor. It is not the case of the department that the transactions were for consideration, but the consideration has not pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, it must be borne in mind that it is subject to such qualifications or limitations as are expressly stated in the Gift-tax Act. Reading the definition of "consideration" in section 2( d ) of the Contract Act in the light of the provisions of the Gift-tax Act, it is clear that the definition has been modified in two respects : (1) the modification to which we have already referred, namely, that in the Gift Tax Act an agreement to transfer property "otherwise than for adequate consideration" [ see section 4( a )] gives rise to a gift to the extent of inadequacy while under definition in the Contract Act that is not so. Under the Contract Act the adequacy or inadequacy of the consideration is immaterial. Similarly, under Explanation 2 to section 25 of the Contract Act, an agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate. It is still a valid agreement, but under section 4( a ) of the Gift Tax Act such an agreement or transfer would be partially bad, to the extent of the inadequacy. It would be gift only to the extent to which the market value of the property at the date of the transfer exceeds the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me onwards, we get a rule of universal application, a uniform test of the actionability of every promise made by parol. In each case, we must ask : Does the promisor get any benefit or the promise sustain any detriment, present or future, in respect of the promise ? If not, the promise is gratuitions, and is not binding." In Cheshire and Fifoot s Law of Contract , sixth edition, the learned authors, commenting on the definition of benefit and detriment, though reiterated in the Court, is not altogether happy. They suggested a different approach following the suggested definition of Sir Frederick Pollock in his Book on Contracts, 13th edition at page 133. At page 60 the learned authors state : A different approach to the problem of consideration may be made through the language to purchase and sale. The plaintiff must show that he has bough the defendant s promise either by doing some act in return for it or by offering a counter-promise. Sir Frederick Pollock has summarised the position in words adopted by the House of Lords in 1915 : "An act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... go to the assessees but to Mahindra and Mahindra Ltd. He, therefore, treated the transfer of the shares as a voluntary act of helping the company "to get out of the situation". The Tribunal took the same view but expressed it by saying "It is clear from what has been stated above that there was no direct consideration moving from Willys to the three assessees". Now in the first place, nothing can turn upon the use of the word "direct". Either the consideration received in the shape of the benefits received by the company under the contract dated 9-10-1957, were benefits which can be treated as good consideration for the assessees for the agreement to transfer the shares by the assessees or it cannot be treated as consideration to them at all. If it could be treated as consideration for the assessees, then it would support the transfer of the shares as being for consideration. In coming to their conclusion, the authorities treated the assessees and the company as different legal entities which they no doubt are. It is no doubt true that the assessees must be distinguished from the company of which they are only the shareholders, directors or officers but there is nothing in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defendant s daughter, on which marriage defendant would give plaintiff 100 marks. Averment that the marriage had taken place and the defendant refused to pay. Danvares J. said : "The defendant has quid pro quo : for he was charged with the marriage of his daughter and by the espousals he is discharged, so the plaintiff has done what was to be paid for. So if I tell a man, if he will carry twenty quarters of wheat of my master Priscot s to G., he shall have 40s, and thereupon he carry them, he shall have his action of debt against me for the 40s; and yet the thing is not done for me, but only by my command : so here he shows that he has performed the espousals, and so a good cause of action has accrued to him : otherwise if he had not performed them. Moyle J. : If I tell a surgeon, if he will go to one J. who is ill, and give him medicine and make him safe and sound, he shall have 100s; there if the surgeon does cure J. he shall have a good action of debt against me for the 100s, although the thing was done for another and not for the defendant himself; if there is not quid pro quo, there is what comes to the same. "Priscot C.J. and Danby J. thought that such an action was not ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pursuant to the first contract and to the fact that certain options were granted to Export in regard to acquisition of shares of company. Then the letter refers to the agreement entered into between Export and company dated "of even date", that is to say, the agreement entered into on 9-10-1957, and states that Export desires to revoke and be released from the exercise of the said option under the said letters. Obviously, the reference here is to the earlier agreements and the letters exchanged. But then the letter goes on to say, "We hereby jointly and severally agree in consideration of the execution of the said agreement, that the said exercise of the said option by Export be revoked and cancelled as if the same had never been exercised". Here, the reference to "the said agreement" is to the agreement of "even date", namely of 9-10-1957, and in consideration of that agreement they agreed to allow Export to revoke and cancel the earlier agreement to buy shares. The further paragraph granting the right to the "right shares" also begins with the words : "In further consideration of the execution of the said agreement entered into on 9-10-1957, is treated by the assessees as consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht shares" which upon the valuation made even by the department itself would be worth Rs. 83,240 in the case of each assessee at Rs. 2 per share. From the start moreover it is clear that Export and Willys were willing to go in for the shares of the company and that is why they had stipulated even at the time of the first agreement for the transfer to them of 30,000 ordinary shares, either at the market price ruling on 8-11-1956, or at the average of the market value during the six months prior to the same. That agreement did not fructify but it is an indication of why the subsequent agreement of 9-10-1957, was entered into. This American company was anxious that if its products were to be sold, its reputation should be maintained and supervision of the assembling and manufacture would be easier by Willys or Export having a shareholding in the company. There were of course considerable difficulties in their way arising out of legislation and the policy of the Indian Government as can be seen from the restrictions placed by the letter dated 12-9-1957, of the Undersecretary to the Government of India, Ministry of Commerce and Industry, New Delhi. The circumstance that the contract e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght of what we have said, we mat now deal with the four points which the Tribunal made in paragraph 18 of its order. First of all they said that there was neither a promisor nor a promisee as defined in the Contract Act. We are quit unable to understand this statement. The promisor in the present case was the assessee in each case and the promisee were Export with whom that contract to transfer shares was made in consideration of Export a freeing to supply 798 motor vehicles given a loan of $ 400,000 to the company. Secondly, the Tribunal says "There is no agreement between the three assessees and the Willys (Export) to do anything in particular". We again fail to understand what is meant by such a remark. The agreement was to transfer the right shares to Export as indicated in the letter dated 9-10-1957, and the consideration was that Export were to supply company with the states number of motor vehicles and to advance them a loan upon the terms stated. The third statement in paragraph 18 is a distinction which we have already dealt with, namely, that a company is a separate and distinct person from the three assessees who are the shareholder and that the agreement between the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, and the assessees and their company on the other were bent only on doing business to their mutual advantage and, in such circumstances, we are surprised to be total that each of the three assessees simply gave away Rs. 83,240 each to Willys and/or Export without any consideration. Businessmen do not give away such large sums of money for nothing without a quid pro quo. In the present case, the consideration for the assessees obviously was their good business relationship with Export and Willys and the fact that these parties had agreed to supply to their company motor vehicles worth well over million dollars and to give the company on easy terms a handsome loan of 400,000 dollars. All this must be judged in the light of the well-known facts that in India at that time and even today, dollars were scarce and very difficult to obtain and the value of the rupee had gone down. The assessees were getting dollars or dollar equivalents by the contracts and giving only rupees in return. All this would in the ultimate analysis bring to the assessees personally large income or gains. The benefits to the company, therefore, could well be regarded by them as good consideration to themsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ror. Consideration may also involve a benefit being conferred on a third party. This benefit conferred on the third party at the instance of the promisor is the consideration to support an agreement between the promisor and the promisee. In the case of Keshub Mahendra v. CGT [1968] 70 ITR 1 at page 22, the Division Bench of the Bombay High Court has considered this very question. In that case also, the question was whether a benefit conferred on a third party could amount to consideration. The court held : " . . . . there is nothing in the definition of consideration in section 2( d ) to show that when the promisee has done or abstained from doing or does or abstains from doing, or promises to do or to abstain from doing, something , the benefit of that act or abstinence must directly go to the promisor. A contract can arise even though the promisee does or abstains from doing something for the benefit of a third party-in this case the company and the assessee can treat that benefit to a third party as a good consideration to him. This is clear upon the authorities. At page 91, Sir William Anson puts the principle thus : " The courts will not make bargains for the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee-company, hence, such transaction did not result into any taxable gift or deemed gift under section 4(1) made by the assessee in favour of such person during the year under consideration. In holding so, the Tribunal also held that even a stranger to a transaction may provide consideration to it which was in conformity with the doctrine of consideration as enunciated in the Contract Act and understood and applied in the Gift-tax Act. The above observations also support the view taken by us hereinbefore. The meaning of the term "consideration" was also examined by the Hon ble Kerala High Court in the case of CGT v. Smt. K. Nagammal [1997] 226 ITR 598 wherein the Hon ble Court held that understanding of the term "consideration" could not be confined to money alone. The relevant findings of the Hon ble Kerala High Court are as under: "In other words, the factual matrix if it is to amount to a gift has to convey firstly that it is a transfer as defined in the above reproduced quotation. Secondly, the absence of consideration also has to be floating on the surface of the record. In this context, it would not be out of place to see and consider as to whether such consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land and building in which Giraben was having two flats and a garage. There were litigations pending in which the assessee-company had claimed arrears of rent from the society. These suits were agreed to be withdrawn by the assessee. A sum of Rs. 20.55 lakhs was agreed to be paid by the society for purchasing the reversionary rights. The entire exercise between the different parties to the agreement was made in order to put an end to all their disputes and differences. Nowhere in the agreement was it stated that the amount payable by Giraben to the society was to be deducted from any amount agreed to be paid by the society to the assessee for purchasing the reversionary rights. It is also nowhere mentioned in the agreement that the assessee-company was entitled to receive any such amount from Giraben or that it had asked the society to waive such amount. Even if the society had waived its dues from Smt. Giraben in view of the composite nature of the agreement which required the assessee-company to withdraw its suits, it cannot be said that the society had waived the amount without any consideration. In fact, the question whether the waiver by the society of its dues in favour of Sm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the case of CGT v. Smt. C.K. Nirmala [1995] 215 ITR 156 also held as under: "Within the framework of the above finding what is required to be decided by this court is whether the transfer of property involved in this case would come within the meaning of the word "gift" in section 2( xii ) of the Act. One of the essential ingredients constituting the gift under this provision is that the transfer of property by one person to another must be "without consideration in money or money s worth". However, the word "consideration" is not defined in the Act and, therefore, it must carry the meaning assigned to it in section 2( d ) of the Indian Contract Act, 1872. In Keshub Mahindra v. CGT [1968] 70 ITR 1 , the Bombay High Court, in a similar situation, adopted the said course. Section 2( d ) of the Indian Contract Act is thus : "When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise. The above provision is no doubt subject to such qualifications or limitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, it can be safely concluded that there is no gift assessable to tax in the facts of the present case." 11.15 Thus, the ratio of these decisions go to show that the term "consid-eration" in legal sense, is some what different from what is generally understood and the revenue s decision is based on general understanding and, therefore, the same is not correct in law as evident from the ratio of these decisions. In this regard, we can cite a number of examples but for the sake of brevity, we may refer to the situation of creation of trust for carrying out charitable activity and vesting of immovable/movable properties therein for which there is no apparent benefit to the persons creating such trust but if such persons do not fulfil their promise, then, such persons can be sued to perform their obligation meaning thereby that creation of trust is with consideration. 11.16 Thus, in view of above discussion, we hold that the said transaction meets all the requirements of general law which is only to be looked into while invoking provisions of section 56(2)( v ) of the Act and, therefore, in our view it is a transaction having a consideration and, therefore, the same does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso raised an alternate contention of charging of notional interest perquisite in the hands of the assessee in case the sum so received was not held as chargeable under section 56(2)( v ) of the Act. This contention is also liable to be rejected as there is no relationship of employee and employer between the assessee and the lenders and the same is rejected accordingly. The revenue has also raised another contention to treat the impugned sums as deemed dividend in the hands of the assessee, however, as stated by the learned counsel at bar that the assessee was not a substantial shareholder in such company as it was holding shares worth Rs. 10,000 only, hence, we hold that the provisions of section 2(22)( e ) of the Act are not applicable. Accordingly, we reject this contention of the revenue also. 13. The assessee has also taken two other contentions i.e. without expressed desire of the parties to a contract the colour of transaction could not be changed unless there was some material to show that whatever was apparent was not real. In this regard, we find that Assessing Officer has merely doubted the nature of transaction for the reason that there was no re-payment obligati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of whom is the lender and the other the borrower. The former lends monies to the latter. The latter receives the sum and promises to repay it by an equivalent amount at a future date with or without interest.................." 14. In the end, we would like to emphasise on the fact that several commercial considerations prevail in the business world for entering into business transactions of various types and as observed by the Hon ble Bombay High Court in the case of Keshub Mahindra ( supra ) if the revenue Authorities tax such transactions in this manner, then, the conduct of business would become impossible. It is also pertinent to mention here that 0 per cent interest loan or interest free loan have been institutionalized where the manufacturing companies or marketing companies compensate the financing companies who give money to the customers interest free to buy the products and these types of loan result into a vibrant economy benefiting all concerned and if the view taken by the Revenue Authorities is accepted then, all such transactions can be taxed as income under section 56(2)( v ) of the Act which cannot be the intention of the legislature, hence, in our view, th ..... 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