AJIT K. SENGUPTA, J.

( 1 ) IN this reference under Section 256 (1) of the Income-tax Act, 1961, made at the instance of the Revenue, the following question of law has been referred to this court :"whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting Rs. 53,119 and Rs. 80,942 from the total income of the assessee in respect of the assessment years 1973-74 and 1974-75, respectively, on the ground that the provisions of Section 2 (24) (iv) of the Income-tax Act, 1961, were not attracted. "the facts stated by the Tribunal are as under.

( 2 ) THE assessee is a director of Messrs. Oberoi Hotels (I.) Pvt. Ltd. He maintained a running account with the said company for a pretty long time. During the assessment years 1973-74 and 1974-75 under consideration, the Income-tax Officer found that the assessee overdrew Rs. 6,62,139 as at the end of the first year under consideration and Rs. 7,47,598 as at the end of the second year under consideration from the said account. He further observed that the said company did not charge any interest on the overdrawn amounts from the assessee. The Income-tax Officer held that the assessee got a benefit from the aforesaid company in the shape of getting funds without any obligation to pay interest thereon. As the assessee was a director of the aforesaid company, he invoked the provisions of Section 2 (24) (iv) of the Income-tax Act, 1961, and calculated a sum of Rs. 53,119 in the first year and Rs. 80,942 in the second year as the value of the aforesaid benefit being interest calculated at 12 per cent. per annum on the overdrawn amounts, He taxed the aforesaid sums under the head "other sources".

( 3 ) THE assessee appealed to the Appellate Assistant Commissioner and contended that the action of the Income-tax Officer was not justified. It was urged that the aforesaid company did not allow the assessee to overdraw from interest-bearing funds but only from its own funds. It was further urged that, in view of a resolution dated May 27, 1968, there was a longstanding practice between the assessee and the company not to charge interest on the aforesaid current account by either party. Further, it was urged that the assessee did not derive any positive benefit or amenity and so the provisions of Section 2 (24) (iv) did not apply. The Appellate Assistant Commissioner did not agree with the contentions. He agreed with the reasons given by the Income-tax Officer in his order and held that the assessee did enjoy a benefit within the meaning of Section 2 (24) (iv) and so he confirmed the assessments.

( 4 ) ON further appeal, the Income-tax Appellate Tribunal deleted the said addition made by the Income-tax Officer under Section 2 (24) (iv) of the said Act. The Tribunal found that the assessee and the company, Messrs. Oberoi Hotels (I) Pvt. Ltd. , were bound by a long-standing practice under which neither party paid interest on the amounts due to the other. It was found that there were credit balances on which the assessee never received any interest from the company in the past. In this background, the Tribunal observed that the assessee could not be said to have derived any benefit simply because some amount was overdrawn by him in a particular year. The Tribunal, therefore, held that the Revenue authorities were not justified in bringing to tax the estimated interest on the aforesaid amounts as a benefit within the meaning of Section 2 (24) (iv) of the Income-tax Act, 1961.

( 5 ) AT the hearing before us, Dr. Pal, learned counsel appearing for the assessee, drew our particular attention to the findings of fact recorded by the Tribunal to the effect that there was an arrangement between the assessee and the company not to charge interest on either side by virtue of a resolution of the board of directors in its meeting held on May 27, 1968. By reason of the said arrangement, the assessee was having substantial balances to his credit with the company in the past

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