1988 (9) TMI 90 - AT - Income Tax

Assessment Year, Benefit Or Perquisite Arising From Business, Foreign Company, Indian Company

Summary

Issues Involved:
1. Deletion of the addition of Rs. 6,66,776 as income under section 28(iv) of the Income-tax Act, 1961.
2. Ownership and use of the car provided by the non-resident firm.
3. Assessment of benefit derived from the use of the car.

Detailed Analysis:

1. Deletion of the Addition of Rs. 6,66,776 as Income under Section 28(iv) of the Income-tax Act, 1961:
The primary issue in this case was whether the sum of Rs. 6,66,776, representing the landed cost of a Mercedes Benz car supplied to the assessee by a non-resident firm, should be included as income under section 28(iv) of the Income-tax Act, 1961. The IAC (Asst.) had initially included this amount as income, reasoning that the car was provided to the assessee free of cost for personal use and ownership. However, the CIT (Appeals) deleted this addition, concluding that the car was not provided for personal use or ownership but for official purposes, and the car was eventually re-exported to the original supplier due to manufacturing defects.

2. Ownership and Use of the Car Provided by the Non-Resident Firm:
The facts revealed that the car was supplied to the assessee by R & E Collections, West Germany, as part of his employment terms. The car was registered in the assessee's name as per the import licence conditions, but it was intended for official use. The IAC (Asst.) had argued that the car belonged to the assessee because it was registered in his name, and he had executed a bond and pledged an FDR as security. However, the CIT (Appeals) and the Tribunal found that these actions were in compliance with the import licence conditions and did not establish ownership. The car was ultimately re-exported to the original supplier without any compensation, indicating that it belonged to the non-resident firm.

3. Assessment of Benefit Derived from the Use of the Car:
The Tribunal examined whether the assessee derived any benefit from the use of the car, which would be assessable under section 28(iv). The assessee claimed that the car had manufacturing defects and was not used for personal or official purposes. This assertion was not rebutted by the IAC. The Tribunal concluded that since the car was not used and was eventually returned due to defects, no benefit was derived by the assessee. Consequently, there was no perquisite in terms of section 28(iv), and the addition of Rs. 6,66,776 was unwarranted.

Conclusion:
The Tribunal upheld the CIT (Appeals)'s decision to delete the addition of Rs. 6,66,776, concluding that the car was provided for official purposes, was not owned by the assessee, and no benefit was derived from its use due to manufacturing defects. The departmental appeal was rejected.