COMMISSIONER OF INCOME TAX vs. S G JHALA

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ITR/376/1983HC GujaratGJHC24011842198302 May 1998Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE KUNDAN SINGH2 pages
AI SummaryAllowed

What did the High Court hold?

The High Court of Gujarat answered the referred question in the affirmative, in favour of the assessee and against the revenue. The Court held that charging of interest at a lower rate than the market rate by an employer is not a perquisite in terms of Section 17(2)(iii)(c) of the Income Tax Act, 1961. This decision was based on the reasoning provided in a previous judgment by the same court in ITR No. 358 of 1983, decided on May 1, 1998. The principle established is that such a concession in interest rate does not fall within the definition of a perquisite as defined in the specified section of the Act. The reference was disposed of accordingly, with no order as to costs. No issue was expressly left undecided.

What were the facts?

The Commissioner of Income Tax (Revenue) referred a question of law to the High Court of Gujarat at Ahmedabad under Section 256(1) of the Income Tax Act, 1961. The reference concerned an order passed by the Income-tax Appellate Tribunal. The assessee is S.G. Jhala. The dispute revolves around whether the employer charging interest at a rate lower than the market rate to an employee constitutes a perquisite under the Income Tax Act. This case is similar to another reference, ITR No. 358 of 1983, which was decided by the High Court on May 1, 1998.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in concluding that the charging of interest at a lower rate than the market rate by an employer is not a perquisite in terms of Section 17(2)(iii)(c) of the Income Tax Act, 1961? Assessee's Contention: The judgment does not record any specific contentions made by the assessee. The decision appears to be based on a prior judgment of the same court. Revenue's Contention: The Revenue, through the Commissioner of Income Tax, is challenging the Tribunal's finding that the lower interest rate is not a perquisite. The Revenue likely argued that this benefit provided by the employer to the employee should be treated as income in the hands of the employee under the relevant provisions of the Act.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 17(2)(iii)(c)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 376 of 1983

For Approval and Signature:

Hon'ble MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements?

2.

To be referred to the Reporter or not?

3.

Whether Their Lordships wish to see the fair copy of the judgement?

4.

Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge?

-------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus S G JHALA -------------------------------------------------------------- Appearance: Mr. B.B.Naik for MR MANISH R BHATT for Petitioner Mr. Manish Shah for Mr. J.P. Shah for the Respondent

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CORAM : MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH Date of decision: 02/05/98

ORAL JUDGEMENT

(Per R.K.Abichandani,J)

The Income-tax Appellate Tribunal has referred the following question for the opinion of this Court under section 256(1) of the Income-tax Act, 1961. "Whether on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that the charging of interest at the lower rate than the market rate by an employer is not a perquisite in terms of section 17(2)(iii)(c) of the Income Tax Act, 1961 ?"

2.

Similar question was referred in ITR No. 358 of 1983 and by our judgment dated 1.5.1998, we have held that charging of interest at lower rate than the market rate by an employer was not a perquisite in terms of section 17(2)(iii)(c) of the Act. For the same reasons as we have given in that decision, we answser the question referred in this Reference in the affirmative against the revenue and in favour of the assessee. The Reference stands disposed of accordingly with no order as to costs.

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***darji

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