(i) S. 28(iv) speaks
about the benefit or perquisite received in kind. Such a benefit or
perquisite received in kind other than in cash would be an income as defined
u/s.2(24). In other words, to any transaction which involves money, S.
28(iv) has got no application.
(ii) Therefore, the
transaction in the instant case being a loan transaction having no
application with respect to S. 28(iv), the same could not be termed as an
income within the purview of S. 2(24). In other words, inasmuch as S. 28(iv)
was not applicable to the transaction on hand, it could not be termed as
income which could be made taxable as receipt.
(iii) Hence, such a
receipt which did not have any character of an income being that of a loan
could not be made exigible to tax.
(iv) Similarly, S.
41(1)(a) also could not have any application inasmuch as the said provision
would be applicable only to a trading liability. Accordingly, a loan
received for the purpose of capital asset would not constitute a trading
liability and, hence, S. 41(1) had no application.
(v) The Revenue
submitted that the facts involved in the instant case would come under the
purview of S. 28(i). The said contention could not be accepted for the
simple reason that it was not the case of the Assessing Officer as well as
the other authorities that the instant case would come under the purview of
S. 28(i).
(vi) The authorities
proceeded only on the footing that S. 28(iv) would be applicable. Further,
S. 2(24) defines ‘income’. While defining ‘profit and gains’, it refers to
the transactions involved u/s.28(iv). Therefore, inasmuch as the provision
contained u/s.28(i) having been not defined as income u/s.2(24), the same
would not partake the character of the income and, therefore, it is not
assessable to tax.
(vii) In other words,
only an income as defined u/s.2(24) can be made assessable to tax. It is a
well-established principle of law that all receipts are not income and,
therefore, liable to be taxed.
(viii) Insofar as the
reference made u/s.36(1)(iii) was concerned, said Section speaks about other
deductions. The said provision deals with the amount of interest paid in
respect of capital borrowal for the purpose of business. Therefore, it had
no relevance to the instant case.
(ix) Accordingly, the
assessee’s appeal was to be allowed by setting aside the orders passed by
the authorities below.”
