Taxable perquisite requires company authority or enforceable right; unauthorised car use alone is not enough.

Unauthorised use of company cars was not treated as a taxable benefit or perquisite unless it arose from an arrangement with the company or was capable of being claimed as of right. Mere use of company property without the company's authority or knowledge did not fall within the relevant deeming provisions. The note also states that, where the managing agency firm had not been assessed on the alleged benefit, additions could not be sustained directly in the individual assessments of the partners on that basis. The resulting additions were therefore held unsustainable in the assessees' individual hands.

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Issues: Whether the unauthorised use of company cars by the assessees constituted a benefit or perquisite obtained from the company so as to fall within section 2(6C)(iii) of the Indian Income-tax Act, 1922, and section 2(24)(iv) of the Income-tax Act, 1961, and whether the additions could be sustained in the individual assessments of the partners without reopening the assessment of the managing agency firm.

Analysis: The provision was held to cover only a benefit or perquisite obtained by some arrangement with the company, or one capable of being claimed as of right. Mere unauthorised user of company property, without the company's authority or knowledge, was not treated as a benefit or perquisite obtained from the company. The basis on which the car expenses were disallowed in the company's assessment was the alleged use by the managing agents, and not use by the assessees in their capacity as directors. The court further accepted that, where the managing agency firm had not been assessed on the alleged benefit, the partners' individual assessments could not be reopened directly on that footing.

Conclusion: The additions under section 2(6C)(iii) of the Indian Income-tax Act, 1922, and section 2(24)(iv) of the Income-tax Act, 1961, were not sustainable in the assessees' individual hands, and the reference was answered against the Revenue.

Ratio Decidendi: A benefit or perquisite is taxable under section 2(6C)(iii) only when obtained from the company with some element of authority or enforceable claim of right, and unauthorised use alone does not suffice; in such a case, the assessment must also follow the proper taxable entity on the basis on which the alleged benefit arose.

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