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TMI Blog1972 (7) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... 957-58 to 1962-63 for the maintenance of its motor cars. The Income-tax Officer, Coimbatore, who made the assessment on the company for the said years disallowed a portion of the company's claim on the ground that the cars were partly used by the managing agents of the company for their private purposes. The amounts so disallowed by him were as under : Rs. 1957-58 13,135 1958-59 16,390 1959-60 12,725 1960-61 12,500 1961-62 7,000 1962-63 8,000 This allowance was made under section 10(4A) of the Income-tax Act, 1922, and section 40(c) of the Income-tax Act, 1961. The Income-tax Officer, Coimbatore, communicated this information to the Income-tax Officer, Karaikudi, where the respondents in T. C. No. 314 of 1966 resided, with a view to include the proportionate share of the expenses in their hands as the partners of the managing agency firm under section 2(6C)(iii) of the Income-tax Act, 1922. On receipt of this information the Income-tax Officer re-opened their original assessments under section 34(1)(b) of the Income-tax Act, 1922, and under section 147 of the Income-tax Act, 1961. In these reassessment proceedings the assessees contended that the company's cars have not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the amounts in question were benefits or perquisites obtained by the assessees from the company ? and (2) Whether the assessees came within the category of the persons described in section 2(6C)(iii) of the Indian Income-tax Act. 1922, or section 2(24)(iv) of the Income-tax Act, 1961 ?" With regard to the first question the Tribunal was of the view that the use of the cars by the assessees for their private purposes could not have been under an arrangement with the company, that the unauthorised use of the company's cars by the assessees could not be called a benefit or perquisite obtained from the company within the meaning of section 2(6C)(iii) of the old Act, and section 2(24)(iv) of the new Act and that the fact that a portion of the car expenses were disallowed in the company's assessment on the ground that the cars were not always used for the business of the company did not straightaway lead to the conclusion that the amount disallowed constituted a benefit or perquisite so far as the assessees were concerned. The Tribunal further held that, in the absence of evidence, it could not be assumed that all the above four partners of the managing agency firm had made equal u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any sum paid by any such company in respect of any obligation which but for such payment would have been payable by the director or other person aforesaid." Section 2(24) of the new Act, which is the correct provision, reads : " 'Income' includes- (i) profits and gains ; (ii) dividend ; (iii) the value of any perquisite or profit in lieu of salary taxable under clauses (2) and (3) of section 17 ; (iv) the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by a person who has a substantial interest in the company, or by a relative of the director or such person, and any sum paid by any such company in respect of any obligation which, but for such payment, would have been payable by the director or other person aforesaid ; ......." As the scope of the above provisions are substantially the same, we will consider the matter in the light of section 2(6C)(iii) of the old Act. The Income-tax Officer, Coimbatore, who made the assessments on the company disallowed a portion of the expenditure on the motor cars under section 10(4A) of the old Act and section 40(c) of the new Act as benefits allowed to the managi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to say, who is concerned in the management of the company, being the beneficial owner of the shares, carrying not less than 20 per cent. of the voting power)" submits that they would squarely come under that section as directors who had obtained a benefit from the company. As regards the contention of the assessee that without reopening the assessment of the managing agency firm and including the disallowed portion of the expenditure on cars in the income of the firm, it is not possible for reopening the assessments of the partners, the learned counsel for the revenue contends that the said point was not raised before the authorities below at any earlier stage, and that, therefore, such a point should not be allowed to be raised now. In the face of these rival contentions it has to be considered whether the assessee obtained any benefit or perquisite from the company and, secondly, whether the assessees come within either of the category of persons described in section 2(6C)(iii). The basic fact to be found out is as to whether the assessees had used the company's cars for their private purposes. The learned counsel for the assessees appears to be right in his submission that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... site as contemplated in section 2(6C)(iii) of the old Act. We also propose to dispose of the case on the basis that the assessees had made use of the company's cars for their own purposes but that such user was without authority of the company for purpose of considering the question as to whether section 2(6C)(iii) of the old Act or section 2(24) of the new Act will stand attracted in this case. We are not inclined to go into the question of fact as to whether the assessees had in fact used the company's cars for their private purposes. Though the assessees would contend before us that the authorities below were in error in assuming that the disallowance of a portion of the expenditure on cars in the company's assessment will automatically establish the actual user of the company's cars by the assessees, they have not invited the Tribunal to give a specific finding on such a question of fact. We, therefore, proceed to consider the question referred on the basis that there has been an unauthorised user of the company's cars by the assessees. In the light of the provisions in section 2(6C)(iii) it is to be seen whether such an unauthorised user was a benefit or perquisite obtained by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority of the company and it is not possible to hold that such advantage or benefit can be brought to charge. Before a person could be said to have obtained a benefit or perquisite from a company there should be some legal or equitable claim, even though it be contingent or contested in nature. A mere receipt of money or property which one is obliged to return or repay to the rightful owner as in the case of a loan or credit, cannot definitely be taken as a benefit or perquisite obtained from the company. The benefit or advantage which might have been taken by a director or other person from a company without any claim of right has to be repaid or returned to the company discovers the unauthorise taking and seeks to enforce its restitution. The principle laid down in Commissioner of Internal Revenue v. Wilcox is this. Taxable gain is conditioned upon the presence of a claim of right to the alleged gain and the absence of definite obligation to repay or return that which would otherwise constitute a gain ; and it does not accrue from the mere receipt of property or money which one is obliged to return or repay to the original owner. Tax liability may rest upon the enjoyment by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the old Act can only take in those authorised by the company. It is not possible to treat both authorised and unauthorised benefits alike as urged by the revenue. We are, therefore, of the view that the uiiauthorised user of the company's car by the assessees will not attract section 2(6C)(iii) as it will not constitute a benefit or perquisite obtained from the company. The leaned counsel for the assessee then contends that the only ground for disallowed given given by the Income-tax Officer at the time when he disallowed the expenditure on cars in the company's assessment was that the managing in agency have used the cars and that, therefore, without taxing the managing agency firm the partners cannot straightaway be taxed in respect of such disallowed portion of the expenditure on cars. He relied on the decision in Commissioner of Income-tax v. Dwarkadas Vassanji, wherein it was held that where a firm had already been assessed and its total income ascertained, it was not open to the department to separately assess the assessee as a partner of the firm on his partnership income which did not form part of the total income of the firm as ascertained by the department under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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