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TMI Blog1992 (2) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... tax (Appeals)? (2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that non-charging of interest on the debit balance in the running account of the directors would not constitute a perquisite ? " The assessee is a limited company. The assessment year with which we are concerned is the assessment year 1979-80. The assessee had borrowed monies and was paying interest thereon at the rate of fifteen per cent. per annum. The amount of the interest that was paid was claimed as a deduction in the computation of the assessee's income under section 36 of the Income-tax Act, 1961. The Income tax Officer disallowed therefrom the sum of Rs. 5,21,241, being fifteen per cent. of the aggreg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in any other provision of the Act, to the computation of income under the head " Profits and gains of business or profession ". The relevant sub-section thereof is sub section (5)(a)(ii). The provision, so far as it is relevant for our purpose, would read thus : Where the assessee incurs any expenditure which results, directly or indirectly, in the provision of any perquisite (whether convertible into money or not) to an employee, then so much of such expenditure as is in excess of the limit specified in respect of clause (c) of sub-section (5) shall not be allowed as a deduction. For the purposes of sub-section (5), " perquisite " is defined in Explanation 2(b)(iii) to mean any benefit or amenity granted or provided free of cost or at conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor to be used without any obligation to pay any interest thereon, the company should be deemed to have granted a benefit to the director. Following this judgment, the Madras High Court in Addl. CIT v. A. K. Lakshmi [1978] 113 ITR 368, took the same view. We are in respectful agreement with this view. We cannot accept the submission that no benefit was conferred upon the assessee's directors by reason of what were, in effect, interest-free advances made to them and it does not appear to us relevant in the context that the assessee may have had funds independent of borrowed funds from which it could have made such advances. It is difficult to appreciate the argument on behalf of the assessee that it had not made any claim for deduction in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1984, viz., the inclusion of sub-clause (vi) in clause (2) of section 17, in these words : " (vi) where the employer has advanced any loan to the employee for the purpose of building a house or purchasing a site or a house and a site or for purchasing a motor car, and either no interest is charged by the employer on the amount of such loan or interest is charged at a rate lower than the rate of interest which the Central Government may, having regard to the rate of interest charged by it from its employees on loans for such purpose granted to them, specify in this behalf by notification in the Official Gazette, an amount equal to, (a) in case where such loan is advanced without charging any interest, the interest calculated in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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