9911796707
TMI Blog1979 (11) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... unting to ₹ 8,483 during the Asst. yr. 1976-77 and ₹ 3,883 during the Asst. yr. 1977-78. 3. The facts of the case are that the assessee company advanced certain loans to three of its Directors, namely S/Shri Vardichand, Onkarlal and Narayanlal and charged interest on these advances @12 per cent per annum. The ITO found that the assessee company had obtained loans mainly from an allied concern M/S Parihar & Company, in which the aforesaid Directors were partners @ 15 per cent. The ITO was of the view that by charging a lesser rate of interest from the Directors, the assessee company has given a concessional treatment to them and, hence, the difference of 3 per cent was liable to be taxed as the income of the assessee. 4. Before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point of view, reliance was placed on the decision of the Madras High Court in 84 ITR 788. 6. The learned representative of the Department on the other hand, submitted that M/s Parihar & Co., is a firm in which the three Directors, were partners, that there was no contract between the parties for charging a lesser rate of interest, and in these circumstances, the value of benefit or amenity provided by the Company to Directors was clearly chargeable to tax as perquisite. In this connection, reliance was placed on the decisions of this Madras High Court reported in 1977 ILR 460 and 113 ITR 378. The learned counsel for the assessee, in reply was submitted that the above two decisions, cited by the learned representative of the Department are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company Pl. Ltd.(1). The facts of this case are identical to the facts of the present case. We are, therefore, of the opinion that no disallowance out of the interest, paid by the assessee company is called for and, accordingly we delete the impugned additions of interest amounting to ₹ 2583 during the Asst. yr. 1976-77 and ₹ 3,883 during the Asst. yr. 1977-78. 8. In the two Departmental appeals relating to the Asst. yrs. 1976-77 and 1977-78, the first common contention is that the AAC was not justified in directing the ITO to allow depreciation on vehicles which were not registered in the name of the assessee company, but were registered in the names of the Directors. The other ground taken by the Department is that the AAC sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see went in appeal and the AAC accepted the assessee's contentions on both the points. As a matter of fact, both the above points were decided in favour of the assessee by the AAC in the assessment for the year 1975-76 vide his order dated 3rd April, 1978 and the department did not file any second appeal in respect of the above year. The Department is aggrieved by the findings of the AAC on the above two points, relating to Asst. yrs. 1976-77 and 1977-78 and has come up in the present appeals. 11. Before us the learned counsel for the assessee has submitted that although the company advanced certain loans to the Directors but these vehicles represented the assets of the company, as reflected in its balance sheet. Further it was pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t should not have agitated this point against a similar finding of the AAC for these two years. 12. As regards the disallowance of interest on the advances made to the Directors for the purchase of the vehicles, it was submitted that it was not a case where the funds of the company were diverted for non-business purpose, but it was a case where the company purchased certain vehicles out of its borrowed funds for the purposes of its business and, in these circumstances, the AAC was quite justified in deleting the disallowance of interest made by the ITO for these two years. 13. The learned representative of the Department on the other hand, has opposed the above contentions and submitted that since the vehicles, in question, were not regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the ITAT Gauhati Bench in the case of ITO vs. Modi Agency (ITA No. 198/Sao/1977-78) decided on 28th June, 1979, and the decision of the ITAT, Bangalore Bench in the case of M/s Associated Auditors, Chittor vs. The ITO, A-Ward. Chittor(2), copies of which were furnished by the assessee in its paper book. The above two decisions support the view taken by the AAC that mere registration of the vehicles in the name of some body else does not disentitle the assessee to the claim of depreciation, particularly when the funds for the purchase of the said vehicles were advanced by the assessee, these vehicles formed part of the assets of the assessee and reflected in the balance-sheet, the vehicles were actually used for the purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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