Ajit K. Sengupta, J.@mdashThis is a consolidated reference u/s 256(1) of the income tax Act, 1961 (''the Act'') for the assessment year 1984-85.
The assessee has challenged the appellate order of the Tribunal whereby the Tribunal held that the grant of loan to the assessee by Paharpur
Cooling Towers (P.) Ltd. at a concessional rate amounted to assessable perquisite. The assessee had filed two miscellaneous applications. In the
first miscellaneous application the assessee had drawn the attention of the Tribunal to the decision of this Court in the case of Commissioner of
Income Tax Vs. P.R.S. Oberoi, The Tribunal distinguished the said judgment of this Court in the case of P.R.S. Oberoi (supra) and rejected the
said first miscellaneous application, but the Tribunal allowed the second miscellaneous application filed by the assessee and held that the facts and
circumstances were identical with those of P.R.S. Oberoi''s case (supra). The revenue''s reference is on the question whether the Tribunal after
having rejected the first miscellaneous application of the assessee whereby the assessee had drawn the attention of the Tribunal to the decision of
this Court in the case of P.R.S. Oberoi (supra) is justified in holding in the order passed in the second miscellaneous application that the issue
involved before the Tribunal and decided was identical.
2. The revenue has contended that such course ought not to have been taken by the Tribunal as there was no mistake apparent from the record
and the Tribunal in fact reviewed the original appellate order by the order passed in the second miscellaneous application.
3. On these facts, the following questions have been referred by the Tribunal at the instance of the assessee:
1. Whether, the Tribunal was justified in failing to consider and/or to hold that in view of the amendments made by the Taxation Laws
(Amendment) Act, 1984 as well as the Finance Act, 1985 in section 17(2) of the income tax Act, 1961 the grant of loans by Paharpur Cooling
Towers (P.) Ltd. to the assessees on the facts and circumstances of the case did not amount to any assessable perquisite ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in upholding the initiation of proceedings as well as
the order passed by the Commissioner u/s 263 of the income tax Act, 1961 in respect of the assessment year 1984-85?
4. At the instance of the revenue the following three questions have been referred:
1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that there was a mistake apparent from the
record in the order passed in M.A. Nos. 16 and 17 (Cal.) of 1989 and revise the same u/s 254(2) of the income tax Act, 1961 ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not upholding the order passed by the Commissioner u/s
263 of the income tax Act, 1961, that loan given to the assessee by his employer at a concessional rate of interest be treated as perquisite in the
hands of the assessee as per provisions of section 17(2)(iii)(a) of the income tax Act, 1961?
3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in relying on the decision of the Hon''ble Calcutta High
Court in the case of Commissioner of Income Tax Vs. P.R.S. Oberoi, in its second order in spite of its observations in order dated 25-2-1991?
5. It is no doubt true that the Tribunal sought not to have gone into the question on merits of the case in the miscellaneous application filed by the
assessee, but having regard to the facts found by the Tribunal it appears to us that the appellate order of the Tribunal was not correct. In the order
passed in the first miscellaneous application the Tribunal distinguished the facts of the case of P.R.S. Oberoi (supra) in the following manner:
The facts in the instant case are distinguishable because the assessee in this case had not paid anything to the company where he has served. There
is also nothing on record that a Board of Directors have passed a resolution to advance the money free of interest to the assessee. Further, there is
nothing on record that Paharpur Cooling Towers Ltd. had not lent the money to the assessee from the amounts borrowed by it. However, the said
company charged the concessional rate of interest. In the case before the Calcutta High Court all these facts were different from the facts of the
assessee. That case is distinguishable on facts. There is considerable substance in the contention of the learned departmental representative that
now holding the perquisite as no benefit would amount to change of opinion and the review of the order. Therefore, there is no mistake of law on
the face of the order.
But in the order passed in the second miscellaneous application the Tribunal has held as follows:
It has become necessary now to examine the Tribunal''s order dated 9th January; 1991, and to find out if any mistake crept in the said order. The
appeals were filed against the order passed u/s 263. The question involved in those appeals was whether the grant of loan or advance by Paharpur
Cooling Towers (P.) Ltd. to its directors, i.e., the assessees who were charged interest at the rate of 6 per cent per annum attracted the provisions
of section 17(2)(iii)(a) of the income tax Act, 1961 or not. The Commissioner held in his order u/s 263 that the grant of loan at a concessional rate
of interest amounted to perquisite to be valued and charged to income tax in the hands of the assessees who were the directors of Paharpur
Cooling Towers (P.) Ltd.
The loans were granted by Paharpur Cooling Towers (P.) Ltd. to the assessees about 15 years back. The said loans were granted out of the said
company''s own funds and not out of borrowed funds. The Commissioner (Appeals) has dealt with this particular aspect in his orders dated 14th
February, 1988 and 14th July, 1988 for the assessment years 1983-84 and 1984-85, respectively.
Shri N.L. Poddar, the learned representative for the assessee, has contended that in fact it was nobody''s case that the advances were made by
Paharpur Cooling Towers (P.) Ltd. to the assessees out of the borrowed funds of the said companies. The Commissioner also did not record such
a finding in his order u/s 263 dated 30th January, 1989 under consideration for the assessment year under appeal. He has also contended that the
assessee''s case is fully covered by the decision of the Calcutta High Court in the case of Commissioner of Income Tax Vs. P.R.S. Oberoi, .
In Oberoi''s case (supra), the loan was granted by the Company to its director-employee free of interest. However, in the present cases, the loan
was granted at 6 per cent with the approval of the Board of Directors of the Company. The loans advanced by Paharpur Cooling Towers (P.)
Ltd. to the assessees were shown in the printed accounts of the said company. The loans were also approved by the shareholders in the General
Meetings during the last 15 years. This requirement was fulfilled as per Companies Act, 1956. These, facts have not been disputed.
Shri Poddar has pointed out a mistake that the Commissioner in his order u/s 263 of the income tax Act, 1961 has held that the grant of loans
amounted to perquisite assessable in the hands of the assessee and, ultimately directed the Assessing Officer to make fresh assessments
accordingly. However, the Tribunal made an observation to consider whether the grant of loans @ 6 per cent in this case to the assessees
amounted to assessable perquisite or not and that the assessees would be at liberty to put forth all the propositions and argument before the
Assessing Officer. Therefore, he has pointed out that there is a contradiction between the orders passed by the Commissioner of income tax and
the Tribunal and it is not clear whether the Assessing Officer would examine the whole issue afresh. Therefore, he has contended to rectify the
appellate orders.
6. Having regard to the decision of this Court in P.R.S. Oberoi''s case (supra) we are of the view that the Tribunal was not justified in holding that
the grant of loans by Paharpur Cooling Towers (P.) Ltd. to the assessee on the facts and circumstances of this case amounted to any assessable
perquisite.
7. For the reasons aforesaid, we answer the first question referred at the instance of the assessee in the affirmative and in favour of the assessee
and the second question in the negative and in favour of the assessee.
8. In view of our answers to the questions raised at the instance of the assessee, the questions referred at the instance of the revenue have become
academic. We, therefore, decline to answer these questions. There will be no order as to costs.
Sen, J.
I agree.