Voluntary write-off of a director's debt can be a taxable perquisite, assessable in the relevant previous year.

A company's voluntary write-off of a director's debit balance was treated as a taxable benefit or perquisite under the statutory definition of income, because extinguishing the debt conferred a measurable pecuniary advantage without requiring any actual expenditure or payment by the company. The deemed benefit was also assessable in assessment year 1957-58, since it arose from a distinct source separate from the assessee's regular receipts and the relevant previous year was correctly taken as the financial year. The liability was therefore held taxable in the relevant year.

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Issues: (i) Whether the write-off by a company of the assessee-director's debit balance constituted income within the meaning of section 2(6C)(iii) of the Income-tax Act, 1922, corresponding to section 2(24)(iv) of the Income-tax Act, 1961; and (ii) whether such deemed income was chargeable in the assessment year 1957-58 on the footing that the relevant previous year was the financial year.

Issue (i): Whether the write-off by a company of the assessee-director's debit balance constituted income within the meaning of section 2(6C)(iii) of the Income-tax Act, 1922, corresponding to section 2(24)(iv) of the Income-tax Act, 1961.

Analysis: The amount written off was not ordinary income in the commercial sense, but the statutory definition of income included the value of any benefit or perquisite obtained from a company by a director. The company had voluntarily resolved to write off the assessee's liability, thereby conferring a measurable pecuniary advantage by extinguishing the debt. The court held that the expression covered a benefit of this kind and that it was not necessary that the company should have incurred an actual expenditure or made a payment to the assessee or to a third party.

Conclusion: Yes. The amount written off was income of the assessee under section 2(6C)(iii) of the 1922 Act and section 2(24)(iv) of the 1961 Act, in favour of Revenue.

Issue (ii): Whether such deemed income was chargeable in the assessment year 1957-58 on the footing that the relevant previous year was the financial year.

Analysis: The source of this deemed income was distinct from the assessee's salary, dividend, and other regular receipts reflected in his account books. The statutory benefit arose from the company's resolution writing off the debt, not from the assessee's usual sources of income. Since no option to adopt a different previous year for this separate source was shown, the financial year was correctly applied as the previous year relevant to the assessment year 1957-58.

Conclusion: Yes. The income was chargeable in assessment year 1957-58 because the relevant previous year was the financial year, in favour of Revenue.

Final Conclusion: The reference was answered against the assessee and in favour of the Revenue, and the deemed benefit arising from the write-off was held taxable in the relevant assessment year.

Ratio Decidendi: A company's voluntary extinguishment of a director's debt can constitute a taxable benefit or perquisite obtained from the company, and such deemed income is assessable in the previous year attributable to its distinct source.

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