Case Law Details

Case Name : CIT Vs. Saranapal Singh (HUF) (Punjab & Haryana Court)
Appeal Number : IT Appeal No. 294 of 2010
Date of Judgement/Order : 06/10/2010
Related Assessment Year : 2006- 07
Courts : All High Courts (4417) Punjab and Haryana HC (225)

CIT Vs. Saranapal Singh (HUF) (Punjab & Haryana Court)- In the instant case, it was held that where the assessee had received a certain amount as short term loan and was duly repaid the said amount could not be treated as income of assessee under section 56(2)(v) of the Act.





IT Appeal No. 294 of 2010 – Asst. Year 2006- 07

Date of Decision- 6th October, 2010



This appeal has been preferred under s. 260A of IT Act, 1961 (hereinafter referred to as “the Act”) proposing following substantial question of law arising out of order dt. 9th Sept., 2009 of the Income-tax Appellate Tribunal, Chandigarh Bench ‘B’, Chandigarh (hereinafter referred to as “the Tribunal”) passed in ITA No. 892/Chd/2009 in respect of asst. yr. 2006-07 : “Whether, on the facts and in the circumstances of the case, the Hon’ble Tribunal has erred in affirming the order of the CIT(A), Chandigarh in view of the decision of Hon’ble Tribunal, Mumbai Bench in the case of Chandrakant H. Shah vs. ITO (2009) 19 DTR(Mumbai)(Trib) 241 by holding that the intention of s. 56(2)(v) is to tax cases of bogus gifts— whereas actually no word like gift has been used in the said section of the IT Act, to suggest that these provisions pertain to gifts only ?”

2. The AO made addition to the returned income on account of amount received as loan which was treated to be receipt within the meaning of s. 56(2)(v) of the Act. On appeal, the CIT(A) set aside such addition which was upheld by the Tribunal. The Tribunal observed in para 9 as under : “Apart from the aforesaid, insofar as the present case is concerned, there is no dispute regarding the nature and source of the impugned unsecured loans. The nature of the amounts having been received as unsecured loans and the sources thereof, is not in doubt. The assessee had also explained that such unsecured loans have been repaid within a short period and  the purpose of raising the loans was also explained before the AO. The AO has not doubted any of the aforesaid features of the transaction but has merely observed that since the unsecured loans were raised free of interest, it constituted receipt of money ‘without consideration’ and therefore he proceeded to invoke s. 56(2)(v) of the Act. In our considered opinion, the factum of the assessee being liable to repay the impugned unsecured loans, imbibes the same with characteristics of a liability. Merely because the amount of loan has been raised without involving payment of interest, cannot be seen to have vested the impugned amount with characteristics of an income, within the meaning of s. 56 (2)(v) of the Act. The existence of the expression ‘without consideration’ in s. 56(2)(v) cannot distract from the fact that in the impugned case, the sum of money received in question carried a liability of its repayment and the same was not received by the assessee with an absolute unfettered right of possession. Therefore, in the totality of circumstances of the prsent case, we find no justification to uphold the stand of the AO and the CIT(A) was justified in deleting the impugned addition. Accordingly, the conclusion of the CIT(A) is affirmed.”

3. We have heard learned counsel for the parties.

4. Learned counsel for the appellant submits that scope of s. 56(2)(v) is very wide which included any amount received by the assessee unless the same was covered by the proviso.

5. We are unable to accept the submission.

6. The amount contemplated under s. 56(2)(v) of the Act cannot include loan which is shown to have been repaid. In the facts and circumstances of the present case, a concurrent finding of fact has been recorded that the amount received was a short-term loan which was duly repaid. The said amount cannot be treated as income of the assessee under s. 56(2)(v) of the Act. Thus, no substantial question of law arises.

7. The appeal is consequently dismissed.


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