COMMISSIONER OF INCOME-TAX VS TARA SINGH, 2000 PTD-DELHI-HIGH-COURT-INDIA 976 (1997)

Income-tax---

----Income---Perquisite---Assessee, Director in company---Certain debit balance in books of company against assessee---I.T.O. adding value of benefit as income of assessee---Finding by Tribunal that value of benefit was not income within the meaning of S.2(24)(iv)---Is not correct in view of decision in Lingappan's case---No contrary view taken by other High Court---Addition of value of benefit as income of assessee---Justified-- Indian Income Tax Act, 1961, S.2(24)(iv).

For the assessment years 1973-74 and 1974-75, the Income-tax Officer noticed certain debit balances in the accounts of the company G, against the assessee and formed an opinion that the assessee, who was one of the directors of the company, had derived benefit from the company assessable to tax within the meaning of section 2(24)(iv) of the Income Tax Act, 1961, and, accordingly, the value of the benefit was added to the income of the assessee. The Appellate Assistant Commissioner, on appeal by the assessee, deleted the addition. The Tribunal held that the value of benefit derived by the assessee from the company was not income within the meaning of section 2(24)(iv) of the Act. On a reference:

Held, that the Tribunal was not correct in holding that no income within the meaning of section 2(24)(iv) was assessable in the hands of the assessee.

CIT v. S. S. M. Lingappan (1981) 129 ITR 587 (Mad.) and CIT (Addl.) v. A. K. Lakshmi (1978) 113 ITR 368 (Mad.) fol.

R. D. Jolly with Ms. Premlata Barisal for the Commissioner.

Nemo for the Assessee

JUDGMENT

This common order shall govern the disposal of two I.T.Rs., namely, I.T.R. No.174 of 1985 and I.T.R. No. 211 of 1985 arising out of two different assessment years though in respect of the same assessee and on the same facts and law. The questions referred for the opinion of the High Court are:

Assessment year 1973-74 (I.T.R. No. 211 of 1985):

"Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that no income within the meaning of section 2(24)(iv) is assessable in the hands of the assessee?"

Assessment year 1974-75 (I.T.R. No. 174 of 1985):

"Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that no income within the meaning of section 2(24)(iv) is assessable in the hands of the assessee?"

The assessee, S. Tara Singh, is one of the Directors of Green Finance India (Pvt.) Ltd. There stood certain a debit balance in the books of the company against the assessee and the Income-tax Officer formed an opinion that the assessee shall be deemed to have derived benefit from the company assessable to tax within the meaning of section 2(24)(iv) of the Act. The value of such benefit was added to the income of the assessee.

The Appellate Assistant Commissioner deleted the addition in the appeal preferred by the assessee. The Revenue went in appeal to the Tribunal which has been dismissed.

Learned -counsel -for the Revenue has relied on the Division Bench decision of the Madras High Court in Addl. CIT v. Late A. K. Lakshmi (1978) 113 ITR 368. The facts of the case bear a close resemblance to the fact of the case at hand. During the course of its judgment, the Division Bench has observed (page 375).

"If either due to magnanimity or with a view to help an employee any amounts are advanced by an employer to an employee without an obligation to pay any interest, we have no hesitation in coming to the conclusion that the employee would be deriving a benefit in that he gets the use of the monies belonging to the company or any other employer, without having any liability to pay interest."

So, is the view taken in yet another Division Bench decision of the Madras High Court in CIT v. S. S. M. Lingappan (1981) 129 ITR 597. In this case, the Division Bench has gone on to hold that even if the benefit has been conferred on the director unilaterally without the aid of any agreement between the parties, the benefit could be taxed as a perquisite under section 17(2)(iii). We find ourselves in respectful agreement with the view so taken by the Madras High Court. We may, however, state that no decision to the contrary has come to our notice.

For the forgoing reasons, we are of the opinion that Tribunal was not correct in law in holding that there was no income within the meaning of section 2(24)(iv) assessable in the hands of the assessee.

Both the questions are answered in the negative, i.e., in favour of the Revenue and against the assessee.

M.B.A./3375/FC Reference answered.