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Issues: Interpretation of section 2(24)(iv) of the Income-tax Act, 1961 regarding the treatment of expenditure on foreign trips of the assessee's minor daughters and a friend met by the company.
Analysis: The High Court of Bombay was tasked with determining whether the expenditure on foreign trips of the assessee's minor daughters and a friend, funded by the company in which the assessee was a director, should be considered as income of the assessee under section 2(24)(iv) of the Income-tax Act, 1961. The court framed the question of law to address this issue, focusing on whether the Appellate Tribunal was correct in holding that the said expenditure did not constitute an obligation that would have been payable by the assessee if not met by the company. The breakdown of the expenditure included amounts spent on the assessee's daughters and a friend, totaling Rs. 26,031. The court referenced previous decisions and legal arguments presented by both parties to reach a conclusion. The court considered the provisions of section 2(24)(iv) of the Income-tax Act, 1961, which includes the value of any benefit or perquisite obtained from a company by a director or a person with substantial interest in the company. The court referred to a prior decision in the case of CIT v. Shri Ramnath A. Podar [1978] 112 ITR 436, where a similar scenario was examined involving the expenditure on the director's wife. In that case, it was established that unless there is a legal fiction or deeming provision, the value of a benefit received by the director's relative cannot be considered as the income of the director. The court reiterated that the mere fact that the company covered the foreign tour expenses does not automatically imply that the director had an obligation to bear those expenses personally. Therefore, the court found the reasoning from the previous decision applicable to the current case and ruled in favor of the assessee, following the precedent set by the earlier judgment. In conclusion, the High Court of Bombay, in line with its decision in CIT v. Shri Ramnath A. Podar [1978] 112 ITR 436, answered the question in the negative, determining that the expenditure on the foreign trips of the assessee's minor daughters and a friend, funded by the company, should not be considered as the income of the assessee under section 2(24)(iv) of the Income-tax Act, 1961. No costs were awarded in this matter.
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