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TMI Blog2007 (8) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit out of interest-free loan granted by two companies. It was alleged that the assessee Ishran Devi Oberoi obtained benefit of the loan granted to her husband Shri Mohan Singh Oberoi by two companies namely M/s. Hotels 1938 Limited and M/s. Northern India Caterers Pvt. Ltd. free of interest. According to the Revenue, since the concerned asses- see obtained benefit of such loan through her husband free from interest such benefit should be treated as income and should have been reflected in return. Having not shown such income in the tax return the assessee escaped assessment of such income. Hence, the assessments for the relevant years were liable to be reopened. Challenging such notice the writ petition was filed by Ishran Devi Oberoi. During the pendency of the proceeding Ishran Devi Oberoi died leaving her surviving her heirs and legal representatives under her will. The appellant in F. M. A. No. 1720 of 1997 was the executor to her estate. The appellant Prithivi Raj Singh Oberoi in Appeal No. 2909 of 2002 was also a director of the above named companies. He was also served identical notice on similar charge. Altogether four writ petitions were heard by the learned single j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue on the other hand contended that the facts involved in CIT v. P. R. S. Oberoi [1990] 183 ITR 103 (Cal) and V. M. Salgaocar and Brothers P. Ltd. v. CIT [2000] 243 ITR 383 (SC) were totally different than that ofthe present appeals. Mr. Shome further submitted that the reason forreopening the assessment was detailed in the affidavit-in-opposition filed by the Revenue before the learned single judge. No affidavit-in-reply was filed to confront such allegation. Hence, the contentions of the Revenue as stated in the affidavit-in-opposition were deemed to have been admitted by the assessee. The learned judge was right in dismissing the writ petition by observing that no prejudice had been caused to the assessee by issuance of such notice. Law on the subject 8 In the case reported in CIT v. P. R. S. Oberoi [1990] 183 ITR 103 (Cal), the Division Bench observed that the director had a running account with the company. Sometimes he also lent and advanced diverse sums to the company without any interest. It was not the case of the Revenue that benefit was derived by the director or his wife through him from a loan which was given by the company for which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of an amount calculated on a particular basis in a case where an employee receives loan for certain prescribed purposes either free of interest or at a rate which was lower than the specified rate. However, subsequently, the Finance Act, 1985, omitted the aforesaid amendments made by the Taxation Laws (Amendment) Act, 1984, with effect from the date of its insertion, namely, April 1, 1985, with a view to provide relief to salaried taxpayers. The very fact that the statute had to be amended at the first instance to bring the said item within the purview of the expression 'perquisite' and it later sought to delete the same from the date of its insertion clearly shows that Parliament does not intend to treat interest-free loan or loan at a concessional rate as any benefit or perquisite granted or provided by the lender-company to the director or employee, as the case may be. If the loan granted to an employee without charging any interest or by charging interest at a concessional rate amounts to a benefit for the purposes of section 17(2)(iii) of the Act, there was no need for Parliament to introduce, by the Taxation Laws (Amendment) Act, 1984, the new sub-clause (vi) in section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... building or site or a site with building or for purchase of a motor car without charging any interest or at a concessional rate, as perquisite. The word 'includes' is often used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the statute. It is a cardinal rule of interpretation that if, by an inclusive definition, the meaning of the word is to be enlarged, it would receive a strict interpretation. It is also a cardinal rule of construction of a fiscal statute that, even if two views are possible, the view which is favourable to the assessee must be accepted while construing the provisions of a taxing statute. For the reasons aforesaid, the non-charging of interest on the amount over drawn in the relevant year cannot be treated as a benefit for the purposes of section 17(2)(iii) of the Act. The question, however, remains as to whether the non-charging of interest will also fall within the purview of section 2(24) (iv) of the Act. For the purposes of applying section 2(24)(iv) of the Act, the same c 'is to what constitutes a benefit or a perquisite has to be applied. If the loan granted to an employee or a director or a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. R. S. Oberoi [1990] 183 ITR 103 (Cal). The Supreme Court put emphasis on the finding of the Tribunal that no evidence was produced by the Revenue to show that the borrowed funds were directly diverted for the benefit of the directors. According to the Supreme Court, the High Court was not correct to go beyond such finding and the appeal of the assessee was accordingly allowed. 10 Following the aforesaid two decisions being P. R. S. Oberoi [1990] 183 ITR 103 (Cal) and V. M. Salgaocar [2000] 243 ITR 383 (SC), the learned single judge in Ishran Devi Oberai [2001 250 ITR 362 (Cal), held that the benefit enjoyed by the petitioner by way of exemption from payment of interest of loan could not be termed to be an "income" under section 2(24)(iv) and as such notice issued under section 148 was not valid. Our view 11 Under section 2(24)(iv), "income" includes the value of any benefit or perquisite whether convertible into money or not, obtained from a company either by a director or a person, having substantial interest in the company or relative of a director or such person, and any sum paid by any such company in respect of any obligation which, but for suc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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