Ajit K.Sengupta, J. - (1.) In this reference under Section 256(1) of the Income-tax Act, 1961, made at the instance of the Revenue, the following question of law has been referred to this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting Rs. 53,119 and Rs. 80,942 from the total income of the assessee in respect of the assessment years 1973-74 and 1974-75, respectively, on the ground that the provisions of Section 2(24)(iv) of the Income-tax Act, 1961, were not attracted." The facts stated by the Tribunal are as under.
(2.) The assessee is a director of Messrs. Oberoi Hotels (I.) Pvt. Ltd. He maintained a running account with the said company for a pretty long time. During the assessment years 1973-74 and 1974-75 under consideration, the Income-tax Officer found that the assessee overdrew Rs. 6,62,139 as at the end of the first year under consideration and Rs. 7,47,598 as at the end of the second year under consideration from the said account. He further observed that the said company did not charge any interest on the overdrawn amounts from the assessee. The Income-tax Officer held that the assessee got a benefit from the aforesaid company in the shape of getting funds without any obligation to pay interest thereon. As the assessee was a director of the aforesaid company, he invoked the provisions of Section 2(24)(iv) of the Income-tax Act, 1961, and calculated a sum of Rs. 53,119 in the first year and Rs. 80,942 in the second year as the value of the aforesaid benefit being interest calculated at 12 per cent. per annum on the overdrawn amounts, He taxed the aforesaid sums under the head "Other sources".
(3.) The assessee appealed to the Appellate Assistant Commissioner and contended that the action of the Income-tax Officer was not justified. It was urged that the aforesaid company did not allow the assessee to overdraw from interest-bearing funds but only from its own funds. It was further urged that, in view of a resolution dated May 27, 1968, there was a longstanding practice between the assessee and the company not to charge interest on the aforesaid current account by either party. Further, it was urged that the assessee did not derive any positive benefit or amenity and so the provisions of Section 2(24)(iv) did not apply. The Appellate Assistant Commissioner did not agree with the contentions. He agreed with the reasons given by the Income-tax Officer in his order and held that the assessee did enjoy a benefit within the meaning of Section 2(24)(iv) and so he confirmed the assessments.;