TMI Blog1980 (1) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... rector could not be a perquisite or benefit within the meaning of section 2(24) of the Income-tax Act, 1961, and that, therefore, it cannot be assessed as the income of the assessee ? " The assessee is an HUF. In the assessment year 1970-71 there was an addition of Rs. 5,394 as perquisite received from M/s. S. S. M. Brothers (P.) Ltd. According to the ITO the karta of the assessee-family was director of the said company and had obtained the benefits in the shape of the use of the company's assets, viz., motor car, telephone, etc. In the assessment of the company there was a disallowance of the expenditure relating to the above assets, under s. 40(c) of the Act, on the ground that the expenditure was excessive and unreasonable having regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this case, a similar claim was considered and the Tribunal, relying on a decision of this court in CIT v. A. R. Adaikappa Chettiar [1973] 91 ITR 90, held that the said ruling governed the facts of the present case and that the unauthorised use of the car belonging to the company was not a benefit or perquisite within the meaning of s. 2(24). The addition was, therefore, deleted. The decision of this court in CIT v. A. R. Adaikappa Chettiar [1973] 91 ITR 90 was rendered on the following facts: A firm was the managing agent of a mill. The four partners of the firm were shareholders as well as directors of the mill. The company claimed in its assessment the expenditure incurred in the maintenance of its motor cars. The ITO disallowed a por ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 authority or knowledge will not amount to a benefit or perquisite obtained. We are not in a position to agree with the contention of the revenue that the word 'obtained ' occurring in the said section need not be agreement-oriented, that the word 'obtained' merely meant 'taken' and that if the directors are in a position to take a benefit with a view to help themselves, even without the authority of the company or against its wishes, they will be governe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on its borrowings. The ITO disallowed the interest-free advance to the director in the hands of the company. He added also the relevant amount as a perquisite in the hands of the assessee who was a director. When the matter came on appeal to the Tribunal it set aside the assessment and at the instance of the Commissioner the matter was brought to this court on reference. It was held that in order to bring a benefit or advantage within the provisions of s. 17(2)(iii) it must have a legal origin and since any unauthorised advantage taken by an employee without the authority of the employer would create a legal obligation to restore such advantage, it would not amount to a benefit or advantage within the meaning of s. 17(2)(iii). In the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961. Even if the benefit has been conferred unilaterally without the aid of any agreement between the parties, in the light of the decision is Kulandaivelu Konar's case [1975] 100 ITR 629 (Mad), the employee could be taxed on the perquisite under s. 17(2)(iii) and (iv) of the I.T. Act, 1961. In Lakshmipat Singhania v. CIT [1974] 93 ITR 162, the Allahabad High Court considered the same question in the context of s. 2(6C)(iii) of the Indian I.T. Act, 1922, and it was pointed out that it was not necessary that the benefit should have been received by the assessee under an enforceable right., This decision also supports the view taken in CIT v. C. Kulandaivelu Konar [1975] 100 ITR 629 (Mad). There was one disquieting feature following t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be wholly different. Merely because there has been a disallowance in the hands of the company, it was pointed out that it did not follow that the whole of it should be taken as the benefit in the hands of the recipient of the benefit. We have also given illustrations to explain the view-point on this aspect. It is unnecessary to dilate on this point further. In view of the difference in approach between the disallowance in the hands of the company and assessment in the hands of the recipient of the benefit, it would be necessary for the authorities in every case to look at the question from the proper standpoint. T.C. Nos. 865, 116, 124, 161,552 to 554 of 1976, 68 to 70 of 1977 are all cases where the question framed is whether it has b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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