1987 (4) TMI 9 - SC - Income Tax

Assessee-respondent who is now dead derived income from securities, dividends, directors fee, commission and trading in stock - salary payable to the assessee, dividend income from two companies, value of perquisites enjoyed by the assessee - held that Perquisites were taxable only if they were convertible into money value - salary not accrues when it is discontinued on basis of oral agreement - deemed dividend is taxable

Summary

Issues:
Assessability of three sums in the hands of the assessee for the assessment year 1954-55:
1. Rs. 16,000 as salary payable to the assessee for the last two months.
2. Rs. 1,82,141 as dividend income from two companies.
3. Rs. 1,85,070 representing the value of perquisites enjoyed by the assessee.

Analysis:

1. Assessability of Rs. 16,000 Salary:
The Income-tax Officer included Rs. 16,000 as salary payable to the assessee for the last two months in the assessment. However, the court found a positive oral agreement preceding the resolution discontinuing the payment of salary, making the sum not addable, leading to the Revenue's failure in this aspect.

2. Assessability of Rs. 1,82,141 Dividend Income:
The Tribunal and High Court ruled in favor of the assessee regarding the dividend income from two companies. The High Court referred to precedents and held that the assessee was not liable to pay tax on the sum of Rs. 1,82,141. However, a subsequent decision reversed the High Court's reasoning, making the amount assessable in the hands of the assessee, subject to the principles established in the Universal Bank of India Ltd.'s case.

3. Assessability of Rs. 1,85,070 Perquisites Value:
The relevant provision for deciding the taxability of the perquisites was Section 2(6C)(iii), amended under the Finance Act, 1955. The court disagreed with the argument that the amendment was clarificatory and held that the liability existing before the clarification would be affected. The matter of whether the perquisites were convertible into money value was remanded to the Appellate Assistant Commissioner for reconsideration. Ultimately, the court upheld the High Court's decision against the Revenue regarding the taxability of the perquisites.

In conclusion, the Supreme Court allowed the appeal in part and dismissed it in part. The court confirmed the High Court's decision on questions (1) and (3) while reversing the decision on question (2) regarding the dividend income, making it assessable in the hands of the assessee. The judgment did not award costs to any party.