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TMI Blog2013 (3) TMI 248X X X X Extracts X X X X X X X X Extracts X X X X ..... co-parceners and karthas). Each of the unit has different composition. Each unit has varied number of members. Under such circumstances, the acceptability of the finding given by the Income Tax Appellate Tribunal has to be considered that the amounts paid by the company towards personal expenses of the assessee cannot be taxed in its hands under Section 2 (24)(iv). So far as the commission from SSVC is concerned, ITAT ordered remand of the issue on the ground that the commission by SSVC was not received by the assessees, but by the HUF of the assessees. The reasoning given by the Tribunal was that when the assessees claimed that the commission payments were made to the CRS Holdings, which is an income tax assessee and whereas, the CIT (A) held that commission was paid to HUF of the assessees and to sort out this contradiction, the Tribunal felt it appropriate to remand the matters to the AO. It is the contention of the Revenue that CRS Holdings did not file any return of income before the survey and the entire things were stage managed after survey. Only based on this statement of the Revenue, ITAT felt that it is a case to be investigated by the AO. It is also relevant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income Tax, Chennai C.S.Srivatsan 49/07 1997-98 2090/M/2005 50/07 1998-99 2091/M/2005 51/07 1999-00 2092/M/2005 52/07 2000-01 2093/M/2005 53/08 2001-02 2094/M/2005 54/07 1996-97 2095/M/2005 Commissioner of Income Tax, Chennai C.S.Seshadri 55/07 1997-98 2096/M/2005 56/07 1998-99 2097/M/2005 57/07 1999-00 2098/M/2005 58/07 2000-01 2099/M/2005 59/07 2001-02 2100/M/2005 60/07 1996-97 2101/M/2005 Commissioner of Income Tax, Chennai C.S.Varadhan 61/07 1997-98 2102/M/2005 62/07 1998-99 2103/M/2005 63/07 1999-00 2104/M/2005 64/07 2000-01 2105/M/2005 65/07 2001-02 2106/M/2005 66/07 1996-97 2107/M/2005 Commissioner of Income Tax, Chennai C.S.Narasimhan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents, the assessees filed appeals before the Commissioner of Income Tax (Appeals). The CIT (A) held that since the company had not claimed the amounts paid for personal expenses of the assessees, the same cannot be treated as income in the hands of its Directors. So far as commission from SSVC is concerned, it was held that although the assessees admitted the same by way of a letter, yet later on it was retracted, the commissions could not be assessed in the hands of the Directors (as there was no other evidence excepting the retracted letter). 2.6. The Revenue took up the matters in appeals to the Income Tax Appellate Tribunal. The Tribunal held that the personal expenses met out of the company's money cannot be treated as income in the hands of the assessees under Section 2(24)(iv) of the Act, as the money had not been paid directly to them, but to the franchisees, which their HUF owned. 2.7. So far as the receipt of commissions from SSVC is concerned, the Tribunal ordered remand of the matters to the Assessing Officer as there was no clarity in the payment / mode of payment of commissions. When the assessees claimed that the commissions were paid to CRS Holdings, the CIT (A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n conferred on the director unilaterally without the aid of any agreement between the parties, the benefit could be taxed as a perquisite under s. 17 (iii) and (iv); (ii) that in view of the difference in approach between the disallowance in the hands of the company and the assessment in the hands of the recipient of the benefit, it would be necessary for the Tribunal to look at the question whether there was any benefit obtained by the assessee from the proper standpoint and to consider the matter afresh in the light of the decision in CIT v. P.R. Ramakrishnan (1980) 124 ITR 545 (Mad). III. (2007) 295 ITR 33 (Mad) (1. Ravi Prakash Khemka, 2. Raj Kumar Khemka, 3. Thirupathy Kumar Khemka Vs. Commissioner of Income Tax):- "Income Company Perquisite to Director Personal Expenses on Credit card of Director Payment by Company LIC Premium paid by Company Assessable as income of Director Income Tax Act, 1961, s. 2 (24) (iv). On the question of addition by invoking section 2 (24) (iv) of the Act, learned counsel for the assessees could not deny the fact that the companies are all group concerns. Natural Energy Processing Company was a defunct firm. There are no materials to show th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of tax, however, are not permissible though the dividing line is not always easy to draw, such a line does exist. The true character of the transaction here clearly was one of an advance of Rs.10 lakhs by the assessee to the Bombay company for whose benefit that sum was obviously intended and had only been channelled through Ace Investments Private Limited. The Tribunal has failed to notice the facts which had been set out in the draft assessment order in annexure B, and has also erred in adopting the wrong approach for the purpose of deciding as to whether the amount disallowed was a sum which could properly fall within the ambit of section 36 (1)(iii) of the Act. The amount disallowed was the amount paid on amounts borrowed, but not used for the purpose of business or profession of the assessee. Rupees 10 lakhs invested in Ace Investments Limited being in substance and reality an amount advanced to the Bombay company for financing the construction undertaken by it at Bombay, cannot be said to be an amount which formed part of the capital borrowed for the purpose of the assessees business." (V) 233 ITR 669 (Commissioner of Income Tax Vs. Tara Singh):- "Income Perquisite A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in personal expenses, such as, tuition fees of children, travel expenses of wife and children of the Directors were paid by the company. With regard to these payments, the contention of the assessees was that it was claimed by the company only as franchisee commission and that the amount treated by the Assessing Officer, as personal expenses of the Directors, have not been claimed by the company in its profit and loss account. It was pointed out that the amounts paid were debited to the account of respective franchisees. Under those circumstances, it was contended that additions made by the Assessing Officer invoking the provisions of Section 2(24)(iv) of the Act have to be deleted. 3.5. Section 2(24) (iv) of the Act reads as follows:- "2. Definitions.... (24). "income" includes - (iv) the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by a person who has a substantial interest in the company, or by a relative of the director or such person, and any sum paid by any such company in respect of any obligation which, but for such payment, would have been payable by the director or other person aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leged to have been recorded during survey under Section 133A of the Act and that any admission made during such statement cannot be made the basis for such addition. In support of the contention, the following decisions are relied upon:- (i) [2008] 300 ITR 157 (Mad.) (CIT vs. S.Khader Khan Son). In this decision, it has been held as follows:- "... (iv) the material or information found in the course of survey proceeding could not be a basis for making any addition in the block assessment; and (v) the word "may" used in section 133A(3) (iii) of the Act, viz., "record the statement of any person which may be useful for, or relevant to, any proceeding under this Act" makes it clear that the materials collected and the statement recorded during the survey under Section 133A are not conclusive piece of evidence by itself." The very same decision also detail the circular relied upon by the learned counsel for the assessee and it reads thus:- "What is more relevant, in the instant case, is that the attention of the Commissioner and the Tribunal was rightly invited to the circular of the Central Board of Direct Taxes dated March 10, 2003, with regard to the confession of additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned. Two out of the four assesses represent the HUF in 'M/s.Sri Sundaravalli Collections', which is the purchasing arm for the M/s.CRS Sons Co. Ltd., Apart from that, they also represent as franchisees (owned by the HUF, of which they are the co-parceners and karthas). 4.4. Each of the unit has different composition. Each unit has varied number of members. Under such circumstances, the acceptability of the following finding given by the Income Tax Appellate Tribunal has to be considered. 4.5. So far as the commission from SSVC is concerned, the Income Tax Appellate Tribunal, ordered remand of the issue on the ground that the commission by SSVC was not received by the assessees, but by the HUF of the assessees. The reasoning given by the Tribunal was that when the assessees claimed that the commission payments were made to the CRS Holdings, which is an income tax assessee and whereas, the CIT (A) held that commission was paid to HUF of the assessees and to sort out this contradiction, the Tribunal felt it appropriate to remand the matters to the Assessing Officer. 4.6. The learned counsel for the Revenue submitted that the remand is unwarranted, especially when the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X
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