Taxable perquisite from interest-free director loan use of company funds can constitute income without a formal agreement.

An interest-free debit balance in a company's books, enjoyed by a director, was treated as a taxable benefit because the use of company funds without interest conferred a measurable advantage. The absence of a formal agreement did not prevent taxation, as the benefit itself was sufficient to attract the charge. The court approved the view that such a benefit could fall within the definition of income under section 2(24)(iv) and could also be treated as a perquisite under section 17(2)(iii) of the Income-tax Act, 1961. The Tribunal's contrary view was rejected, and the benefit was taxable in the director's hands.

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Issues: Whether the benefit derived by a director from an interest-free debit balance in the company's books constituted income within the meaning of section 2(24)(iv) of the Income-tax Act, 1961.

Analysis: The assessee, being a director, was allowed to enjoy the use of company funds without liability to pay interest. The Court accepted the view that such use of money conferred a measurable benefit on the director and that the absence of a formal agreement did not prevent the benefit from being taxed. The Court also approved the principle that a benefit so conferred could be treated as a perquisite under section 17(2)(iii) of the Income-tax Act, 1961.

Conclusion: The benefit was taxable as income in the hands of the assessee, and the Tribunal was incorrect in holding otherwise.

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