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Lakshmipat Singhania Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 410 of 1967
Judge
Reported in[1974]93ITR162(All)
ActsIndian Income Tax Act, 1922 - Sections 2(6C)
AppellantLakshmipat Singhania
RespondentCommissioner of Income-tax
Appellant AdvocateV.B. Upadhya, Adv.
Respondent AdvocateR.R. Misra, Adv.
Excerpt:
- .....section 2(6c) of the indian income-tax act, 1922, provides that income includes the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by any other person who has a substantial interest in the company. it is not disputed that the rent-free accommodation provided to the assessee amounts to a benefit. the assessee is a director of the company which has provided this benefit. on these two facts alone section 2(6c) applies and the value of the benefit would be deemed to be the income of the assessee.4. the contention of the learned counsel for the assessee is that the rent-free accommodation provided to the assessee cannot be said to be a perquisite which means some benefit over and above the salary. the assessee.....
Judgment:

K.L. Gulati, J.

1. This is a reference under Section 66(1) of the Income-tax Act. It relates to the assessment years 1955-56 and 1956-57 The following common question of law arises in both the years which has been referred to us for opinion :

'Whether, on the facts and in the circumstances of the case, the rent-free accommodation, the other benefits provided to the assessee by M/s. J. K. Jute Mills Co. Ltd. during the relevant years, were incomewithin the meaning of Section 2(6C)(iii) of the Indian Income-tax Act, 1922?'

2. The assessee, Lala Lakshmipat Singhania, was at the material time a director of J. K. Jute Mills Co. Ltd. He was provided free accommodation by the company in its house known as 'J. K. House' at Calcutta. The Income-tax Officer treated the free use of the said property in the hands of the assessee as a perquisite under Section 2(6C) of the Indian Income-tax Act, 1922. The value of the rent-free accommodation was fixed at Rs. 19,440 for each of the two assessment years and, along with other benefits, was assessed to tax in the hands of the assessee. The assessee's appeals have been rejected both by the Appellate Assistant Commissioner of Income-tax and the Income-tax Appellate Tribunal. The assessee is aggrieved and has brought this reference before us.

3. Clause (iii) of Section 2(6C) of the Indian Income-tax Act, 1922, provides that income includes the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by any other person who has a substantial interest in the company. It is not disputed that the rent-free accommodation provided to the assessee amounts to a benefit. The assessee is a director of the company which has provided this benefit. On these two facts alone Section 2(6C) applies and the value of the benefit would be deemed to be the income of the assessee.

4. The contention of the learned counsel for the assessee is that the rent-free accommodation provided to the assessee cannot be said to be a perquisite which means some benefit over and above the salary. The assessee receives no salary. It is not necessary to deal with this contention, although there is very little force in it, because even if it is not a perquisite, it is a benefit alright and under Section 2(6C) a benefit is income as much as a perquisite.

5. The other contention of the learned counsel is that Section 2(6C) would only apply if the benefit is received by a person in the capacity of a director and not merely because he happens to be a director. We find no force in this contention either. As soon as a person receives a benefit from a company and he happens to be a director of that company, Section 2(6C) would immediately be attracted and the value of such benefit would be deemed to be his income. There is no further requirement of any kind. In any case there is a finding recorded by the Tribunal that the assessee received the benefit or perquisite in his capacity as a director of the company. This finding has not separately been challenged by the assessee.

6. The learned counsel then referred to the case of Commissioner of Income-tax v. S. P. Jain, [1967] 65 I.T.R. 416 (Pat).. There the value of a rent-free house providedby a company to a shareholder was held not to be his income, because the benefit was not convertible into money. Section 2(6C), however, was amended in 1965 so that the value of a benefit or perquisite is income even if it is not convertible into money.

7. Learned counsel then stated that the value of the perquisite or the benefit under Section 2(6C) is taxable as income only if the same is received by the director under an enforceable right. Whether the assessee received the perquisite or the benefit from the company under an enforceable right or not is a question which was never raised by the assessee before the Tribunal. The onus lay upon the assessee to assert and prove that the benefit was given to him not under any enforceable right. Moreover, as we have already indicated above, no such requirement is contemplated by Section 2(6C) itself. It is in absolute terms. A director would be liable to assessment in respect of the value of any benefit or perquisite received by him from the company of which he is a director under all circumstances without exception.

8. We accordingly answer the question in the affirmative. The Commissioner is entitled to the costs which we assess at Rs. 200.


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