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TMI Blog1982 (8) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of the firm was of financing. The firm invited deposits exceeding Rs. 19 lakhs on or about 31-3-1976, i. e., the end of the preceding accounting year. It advanced the moneys to the relatives or associates of the partners and also for the personal purposes of the partners. In the accounting year beginning from 1-4-1976 under consideration it was noticed that 115 depositors or creditors accepted lesser amounts than the amounts deposited and gave a remission aggregating in all to Rs. 3,77,230. The ITO in para 7 of his order also mentions that the remission was a result of final settlement between the depositors and the assessee. The ITO held that the money so forgone represents nothing but benefit obtained by the firm from carrying on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) as is used in section 28(iv) of the Act. He invited attention to the observations in para 2 of the Delhi High Court judgment at page 526 about the manner in which the language of section 28(iv) is to be interpreted and taking clue from the reasoning of the Delhi High Court, he argued that the assessee got a pecuniary benefit when creditors remitted the amount and that benefit arose from their extinguishing the assessee's liability and in a sense extinguishment of liability owed by the assessee to its depositors was a profit. It was his further contention that this being so, there was no benefit in terms of money derived by the assessee and that a liability relating to money was not money itself. In this way, he tried to argue that his ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut that the assessee has allowed this finding of the ITO about no business activity to become final and the undisputed case is that there was no business activity in the accounting year. In view of this, it was Shri Patel's contention that section 28(iv) on the facts of the case had no application as no business was carried on by the assessee in the assessment year 1977-78. The second line of reasoning was that section 28(iv) would not apply where the remissions received by the assessee are in the form of cash or money and this argument was based on the Gujarat High Court decision in the case of Alchemic (P.) Ltd. He submitted that this was a case of composition of money deposits between depositors and an insolvent debtor who obtained a set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(iv) corresponding to section 2(6C)(iii) of the 1922 Act which came to be considered by the Delhi High Court in the case of K. S. Malik. But first we will deal with the different language used in section 28(iv) which has a connection with the first contention of Shri K. C. Patel. Section 28(iv) brings to tax the value of any benefit or perquisite, whether convertible into money or not, arising from business. It will be relevant to find out whether there was any business carried on by the assessee during the accounting period as pointed out by Shri Patel. It is undisputed position now that no business activity was carried on by the assessee in the accounting period. In support of this submission, he has relied upon the observations in the o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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