1972 (4) TMI 29 - HC - Income Tax

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

Summary

Issues:
1. Whether rent-free accommodation and other benefits provided to the assessee were income within the meaning of section 2(6C)(iii) of the Indian Income-tax Act, 1922?

Detailed Analysis:
The judgment delivered by R. L. Gulati J. of the High Court of Allahabad pertains to a reference under section 66(1) of the Income-tax Act concerning the assessment years 1955-56 and 1956-57. The central question raised in both years was whether the rent-free accommodation and other benefits provided to the assessee, who was a director of a company, constituted income under section 2(6C)(iii) of the Indian Income-tax Act, 1922. The Income-tax Officer had treated the free accommodation as a perquisite under the Act and assessed its value along with other benefits to tax in the hands of the assessee. The appeals of the assessee were rejected by the Appellate Assistant Commissioner of Income-tax and the Income-tax Appellate Tribunal, leading to the reference before the High Court.

The crux of the matter revolved around the interpretation of section 2(6C) of the Act, 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 as income. The court affirmed that the rent-free accommodation provided to the assessee by the company constituted a benefit and, as the assessee was a director of the company, section 2(6C) applied, deeming the value of the benefit as the income of the assessee. The court dismissed the argument that the accommodation was not a perquisite as it still qualified as a benefit under the Act.

Moreover, the court addressed the contention that section 2(6C) would only apply if the benefit is received in the capacity of a director and not merely because of holding the position of a director. The court rejected this argument, emphasizing that once a person, being a director, receives a benefit from the company, section 2(6C) is triggered, and the value of the benefit is deemed as the person's income. The court highlighted that there was no requirement beyond this, and the fact that the benefit was received in the capacity of a director sufficed for the application of the provision.

Furthermore, the court discussed the case law and amendments related to section 2(6C), emphasizing that the value of a benefit or perquisite is considered income even if it is not convertible into money. The court also addressed the argument that the benefit should be received under an enforceable right for it to be taxable as income, clarifying that such a requirement was not envisaged by section 2(6C) itself. The court held that a director is liable to assessment for the value of any benefit received from the company under all circumstances without exception.

In conclusion, the court answered the question in the affirmative, affirming that the rent-free accommodation and other benefits provided to the assessee were indeed income within the purview of section 2(6C)(iii) of the Indian Income-tax Act, 1922. The Commissioner was awarded costs, assessed at Rs. 200, and the question was answered in the affirmative.