JUDGMENT

D.P. Wadhwa, J.-Civil Appeal No.657 of 1994 is directed against the judgment dated February 7, 1992 of the Division Bench of the Karnataka High Court (now reported as (1992) 198 ITR738) delivered on Reference made to it by the Income Tax Appellate Tribunal ( Appellate Tribunal for short) under Section 256(2) of the Income Tax, 1961 (for short, the Act ) Reference was at the instance of Revenue. Following questions arose for the determination of the High Court :

(1) Whether on the facts and in the circumstances of the case the Appellate Tribunal is right in law in deleting addition of Rs.5,21,241 made by the Income Tax Officer under Section 40A(5) and sustained by the Commissioner of Income Tax (Appeals)?

(2) Whether on the facts and in the circumstances of the case the Appellate Tribunal is right in law in holding that non-charging of interest on the debit balance in the running account of the directors would not constitute a perquisite?"

High Court answered both the questions in negative and in favour of the Revenue. The assessee, a Company, felt aggrieved and sought leave to appeal under Article 136 of the Constitution which was granted.