TaxTMI 
TaxTMI 
1980 (1) TMI 22
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....he assessee-family was director of the said company and had obtained the benefits in the shape of the use of the company's assets, viz., motor car, telephone, etc. In the assessment of the company there was a disallowance of the expenditure relating to the above assets, under s. 40(c) of the Act, on the ground that the expenditure was excessive and unreasonable having regard to the legitimate business needs of the company. In the present case, the ITO took into account the possible extent of use of the company's assets, viz., motor car, telephone, etc., and Evaluated the benefits obtained by the assessee under s. 2(24)(iv) of the Act, at Rs. 5,394. The break-up of Rs. 5,394 is as follows : Rs. Motor car 4,894 Telephone 100 Travelling 100 Messing 300 ------------ 5,394 ------------ The assessee contested before the AAC the inclusion of the said sum of Rs. 5,394 in its hands as perquisities. The AAC rejected the assessee's claim. When the matter came before the Tribunal, an earlier order of the Tribunal in the case of S. S. M. Balakrishnan in I.T.A. No. 1908 (Madras) of 1973-74, dated April 16, 1974, was relied on. In that case it had been held that the fre....
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....tion. We are not inclined to accept the above contention. In our view, the benefit or perquisite obtained should be by some sort of arrangement with the company so as to attract section 2(6C)(iii). If the submission that even unauthorised benefit would attract the said section is accepted, it would mean that even an article or money of the company misappropriated or forcibly taken against the wishes of the company by a director or other person referred to in that section will come within the scope of that section. The words 'benefit or perquisite obtained' from a company would take in, in our opinion, only such benefit or perquisite which the company had agreed to provide and which the person concerned could claim as of right based on such agreement and that a mere advantage derived from the company without its authority or knowledge will not amount to a benefit or perquisite obtained. We are not in a position to agree with the contention of the revenue that the word 'obtained ' occurring in the said section need not be agreement-oriented, that the word 'obtained' merely meant 'taken' and that if the directors are in a position to take a benefit with a view to help themselves, even....
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....ady been extracted above from CIT v. A R. Adaikappa Chettiar [1973] 91 ITR 90, Ramaswami J., who delivered the judgment and who was a party to the previous decision, observed thus (P. 634): " As one who was a party to that judgment, I may be permitted to point out that we were not concerned in that case whether a voluntary payment by an employer to an employee would amount to a perquisite or not. We were concerned in that case with the unauthorised user of certain vehicles by a director. Therefore, the use of the word 'only' in the beginning of the portion of the judgment cited above cannot be given too much emphasis. But there could be no doubt that in order to bring benefit or advantage within the provision of section 17(2)(iii), it must have a legal origin and since any unauthorised advantage taken by an employee without the authority of the employer would create a legal obligation to restore such advantage, it would not amount to a benefit or advantage within the meaning of section 17(2)(iii). " As a result of this clarification of this court of the principle laid down in CIT v. A. R. Adaikappa Chettiar [1973] 91 ITR 90, the position now is that the decision in CIT v. A. ....
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....at they did not dovetail into each other so that the approach in each kind of case would be wholly different. Merely because there has been a disallowance in the hands of the company, it was pointed out that it did not follow that the whole of it should be taken as the benefit in the hands of the recipient of the benefit. We have also given illustrations to explain the view-point on this aspect. It is unnecessary to dilate on this point further. In view of the difference in approach between the disallowance in the hands of the company and assessment in the hands of the recipient of the benefit, it would be necessary for the authorities in every case to look at the question from the proper standpoint. T.C. Nos. 865, 116, 124, 161,552 to 554 of 1976, 68 to 70 of 1977 are all cases where the question framed is whether it has been rightly held by the Tribunal that the free use of the company's car by the director could not be a perquisite or benefit within the meaning of s. 2(24) of the I.T. Act, 1961, and 'that, therefore, it cannot be assessed as the income of the assessee. On this point, in the light of the decision in CIT v. P. R. Ramakrishnan [1980] 124 ITR 545 (Mad), it would ....