SOHAN SINGH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) These three reference applications involve identical issues and, therefore, we dispose of them by this common judgment.At the instance of assessee, following questions have been referred for opinion of this Court under Section 256(1) of the Income-tax Act, 1961 by the Income-tax Appellate Tribunal Delhi Benches B & E (in short the 'Tribunal'): For Assessment year 1979-80

(2.) Factual position in nut-shell is as follows: Assesssee was one of the directors of National Chemical Industries Limited, New Delhi. His account in the books of account maintained by the aforesaid company was a debit balance as on the end of the accounting period relevant. The company did not charge any interest on the amount standing to the debit of the assesses. Income-tax Officer required the assessee to explain why the amount, on which interest should have been charged, should not be treated as income in terms of Section 2(24)(iv) of the Act. It was noticed that the company was paying interest @ 15% to the banks from whom it had borrowed funds. Assessee's explanation was that the amount in question cannot be covered under Section 2(24)(iv) of the Act. But the Assessing Officer did not accept the explanation and calculated interest payable @ 12% and worked outsit/final amount which was taken as value of the benefit and as such to be deemed income of the assessee under Section 2(24)(iv) of the Act. Assessee preferred appeals before the Commissioner of Income-tax (Appeals) who accepted assessee's stand and deleted the additions for the assessment year 1979-80 and 1980-81 but for 1978-79, action of the Assessing Officer was maintained. Revenue carried the matter in appeal before the Tribunal for the assessment years 1979-80 and 1980-81 while assessee preferred appeal for the assessment year 1978-79. It was contended that withdrawals made by the assessee from the company were duly entered in the books of the company and were incorporated in the annual audited statement of accounts which implied, tacit if not expressly, the approval of the company to the waiver of interest. Accordingly it was held that the amount in question was rightly brought to tax by the Assessing Officer as income of the assessee. On being moved for reference, questions as set out above have been referred for opinion of this Court.

(3.) We have heard learned counsel for Revenue. There is no appearance on behalf of the assessee in spite of notice.