TMI Blog1976 (4) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... to him, the elder brother of Shri G. Venkataraman, the late G. Rudrappan, was a director of Messrs. Vijayakumar Mills Ltd., a company in which the public not substantially interested. The family held substantial shares in the company. It was found that during the previous year relevant to the assessment year 1960-61, the late Rudrappan had drawn moneys to the extent of Rs. 5,90,705 from the company. When the company brought this to the notice of the karta, Shri G. Venkataraman, after the death of G. Rudrappan, by a letter dated November 19, 1960, the said Shri G. Venkataraman, by his letter dated November 28, 1960, accepted the liability of the estate to the extent of Rs. 4,50,000, after verification of accounts of Sri Rudrappan. The Income-tax Officer assessed this amount of Rs. 4,50,000 for the assessment year 1960-61 as dividend under section 2(6A)(e) of the Indian Income-tax Act, 1922, as advance or loan paid to a shareholder and limiting it to the extent of the accumulated profits of the company, namely, Rs. 3,21,173. However, on an appeal preferred by the assessee, the Appellate Assistant Commissioner held that the amount in question was embezzled by the late G. Rudrappan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 2(6C)(iii) of the Income-tax Act, 1922. The reasoning of the Appellate Assistant Commissioner was that there was no loan or payment by the company to the assessee, but it was only an embezzlement by the late director and therefore there was no question of paying any interest and that the question of computing benefit or perquisite under section 2(6C)(iii) would arise only in the case of legal payment or bona fide loan advanced. The department preferred an appeal to the Income-tax Appellate Tribunal and the Income-tax Appellate Tribunal dismissed the appeal. It is, thereafter, at the instance of the department, the two questions mentioned above have been referred to this court for its opinion. As we have pointed out already, the first question deals with the sum of Rs. 3,21,173. The same was the subject-matter of the original assessment as well is reassessment. It is the original assessment that was brought to this court in T.C. No. 113 of 1967 and which was disposed of by this court in Commissioner of Income-tax v. G. Venkataraman [1975] 101 ITR 673 (Mad), referred to already. This court held in that case that the sum of Rs. 3,21,173 was the amount criminally misappropriated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section has been the subject matter of a decision by this court in Commissioner of Income-tax v. A. R. Adaikappa Chettiar [1973] 91 ITR 90, 97, 98 (Mad). Dealing with this question the Bench observed : " The contention of the learned counsel for the revenue is that any benefit or perquisite obtained willy-nilly, whether authorised or unauthorised, will attract the above section. We are not inclined to accept the above contention. In our view, the benefit or perquisite obtained should be by some sort of arrangement with the company so as to attract section 2(6C)(iii). If the submission that even unauthorised benefit would attract the said section is accepted, it would mean that even an article or money of the company misappropriated or forcibly taken against the wishes of the company by a director or other person referred to in that section will come within the scope of that section. The words 'benefit or perquisite obtained' from a company would take in, in our opinion, only such benefit or perquisite which the company had agreed to provide and which the person concerned could claim as of right based on such agreement and that a mere advantage derived from the company without its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion was embezzled by the late Rudrappan, it cannot be said that the said amount was obtained by the said late Rudrappan from the company. It will, therefore, follow that on the face of it, section 2(6C)(iii) will have no application whatever to the facts of the present case. In addition to the finding that the amount in question was embezzled by the late Rudrappan from the company, the Bench of this court which had occasion to consider the question earlier in Commissioner of Income-tax v. G. Venkataraman [1975] 101 ITR 673 (Mad), referred to already, referred to the finding of the Tribunal that the amount was criminally misappropriated by the late Rudrappan and stated that the Bench was in agreement with that finding. Under these circumstances, looked at from any point of view, so long as the finding that the amount was embezzled by the late Rudrappan stands, as it has to stand, necessarily the question of late Rudrappan or the Hindu undivided family obtaining that amount as a benefit or perquisite from the company so as to attract the applicability of section 2(6C)(iii) of the Indian Income-tax Act, 1922, will not arise. Independent of these considerations, there is also ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
