1979 (7) TMI 155 - AT - Income Tax

Tribunal Overturns Orders, Calls for Reassessment of Perquisite Amount

AR SRINIVASAN. Versus INCOME TAX OFFICER.

AR SRINIVASAN. Versus INCOME TAX OFFICER. - TTJ 008, 630, Issues:Whether any amount is taxable as perquisite under s. 17(2)(iii) of the IT Act, 1961 in the hands of the assessees for the assessment years 1973-74 and 1974-75.Detailed Analysis:The appeals before the Appellate Tribunal ITAT Madras-C revolve around the question of whether certain amounts are taxable as perquisites under section 17(2)(iii) of the IT Act, 1961 for the assessment years 1973-74 and 1974-75. The issue stemmed from the treatment of interest chargeable on debit balances of directors in a company, where the company did not charge interest on these balances. The Income Tax Officer (ITO) held that these amounts should be treated as perquisites in the hands of the directors. The Assistant Commissioner (AAC) upheld this view, citing a ruling of the Madras High Court. However, the AAC did not consider the argument regarding personal security and collateral security offered by the directors in relation to loans raised by the company in determining the quantum of perquisite.The counsel for the assessee contended that there was no element of perquisite in this case, emphasizing the absence of benefit constituting a perquisite under section 17(2)(iii) of the Act. The counsel argued that the offering of personal and collateral security should negate the existence of any perquisite. On the other hand, the Revenue's representative claimed that the plea regarding the detrimental material of offering security was not raised before the ITO and should be examined.The Tribunal considered the submissions and noted that previous judgments had found against the assessee on the issue of interest chargeable on debit balances. However, the Tribunal agreed to consider the plea raised by the assessee regarding the quantum of perquisite. It was observed that the AAC had not properly examined this aspect and that the offering of personal and collateral security by the directors should be taken into account. The Tribunal disagreed with the AAC's reasoning that directors were obligated to ensure the company's financial well-being, stating that there was no legal obligation for directors to provide personal and family property security. Therefore, the Tribunal set aside the AAC's orders and directed a fresh disposal of the appeals, instructing the AAC to consider the plea raised by the assessee regarding the quantum of perquisite in light of the offered securities.In conclusion, the appeals were treated as allowed in part for statistical purposes, and the Tribunal emphasized the need to reassess the quantum of perquisite considering the detrimental factor of offering personal and collateral security by the directors in relation to loans raised by the company.