2003 (11) TMI 35 - HC - Income Tax

Whether Tribunal was right in holding that the foreign travel expenses incurred on behalf of the assessee by the company in which her husband is the managing director cannot be assessed in the hands of the assessee under section 2(24)(iv)? - The assessee having received a benefit from the company which had no obligation to provide such a benefit to her but had done so gratuitously, the value of the benefit so received by the assessee is required to be treated as part of her income. Thus, question referred to us is, answered in favour of the Revenue and against the assessee.

Summary

Issues:
1. Taxability of foreign travel expenses incurred by a company for the assessee under section 2(24)(iv) of the Income-tax Act.
2. Validity of canceling the Commissioner of Income-tax's order regarding foreign travel expenses as a perquisite in the hands of the assessee.

Analysis:
1. The High Court considered whether the foreign travel expenses paid by a company for the assessee, who was the wife of the managing director, should be assessed under section 2(24)(iv) of the Income-tax Act. The Commissioner, under section 263, directed the Assessing Officer to assess the benefit received by the assessee from the company. The Tribunal accepted the assessee's claim that it was customary for spouses to accompany directors on foreign travel but found no proof of such custom. The court cited precedents where similar expenses were disallowed as gratuitous payments not made out of commercial expediency. The court held that the benefit received by the assessee fell within the scope of section 2(24)(iv) as a gratuitous payment from the company.

2. The second issue involved the validity of canceling the Commissioner's order regarding the foreign travel expenses as a perquisite in the hands of the assessee. The court referred to previous decisions where similar expenses were disallowed as not made out of commercial expediency. The court emphasized that the company's payment was gratuitous, and the assessee received a benefit without any obligation. The court held that the Revenue could assess the amount as income in the hands of the assessee, even if it was allowed as a deduction in the assessment of the company. The questions were answered in favor of the Revenue and against the assessee, upholding the taxability of the foreign travel expenses incurred by the company for the assessee.