Director legal defence costs taxed as a perquisite where company's expenditure, not hypothetical personal spend, measures the charge.

Where a company pays a director's legal defence costs in connection with a benefit provided to him, those sums are taxable as a perquisite and emolument of office under Schedule E. The charge is measured by the company's actual expenditure in providing the benefit under the relevant provisions of the Income Tax Act 1952, not by the amount the director would hypothetically have spent personally. Any countervailing deduction depends on the statutory conditions for that deduction, and the assessment is not reduced by a notional personal outlay.

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Issues: Whether legal defence expenses paid by a company for its director constituted a taxable benefit and perquisite of office assessable under Schedule E, and whether the charge was confined to the amount the director would otherwise have spent himself.

Analysis: The company's payment of the director's solicitors' and counsel's fees was an expense incurred in connection with the provision of a benefit to the director. On the combined operation of sections 160 and 161(1) of the Income Tax Act, 1952, the charge arose on the sum expended by the company as the expense of providing the benefit, not on a reduced amount measured by what the director might have spent personally. The language of the Act did not justify dissecting the expenditure by reference to the director's hypothetical own outlay, and the possibility of any countervailing deduction depended on the statutory conditions for that deduction.

Conclusion: The expense was taxable as a perquisite and emolument of the director's office, and the assessment was not limited to the amount he would have spent himself. The appeal was allowed and the cross-appeal failed.

Ratio Decidendi: Where a company incurs expenditure in providing a benefit to a director, the taxable charge under the relevant provisions is measured by the company's expenditure incurred for that benefit, not by a hypothetical or lesser amount the director might have paid personally.

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