Interest-free loans is Gift within meaning of section 56(2) or Not .....

Interest-free loans is Gift within meaning of section 56(2) or Not 

  Merely because the amount of the loan has been raised without involving payment of interest, it cannot be seen to have vested the impugned amount with characteristics of an income, within the meaning of section 56(2) of the Act. In the case of a loan, the promise to pay back the equivalent sum in the future shows the presence of consideration as defined in sec 2(d) of the Contract Act, 1872. This view has been supported by the Hon'ble Delhi High Court in CIT v. Mridu Hari Dalmia17. From the above, it can be interpreted that a loan has a two-way traffic and gift has only one traffic. This view is also supported in CIT v. Saran Pal Singh (HUF)18 as well.

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