Bombay H.C : Whether, on the facts and in the circumstances of the case, the tribunal was justified in holding that the expenditure on the foreign trips of the assessee’s minor daughters and dr. Madan, met by the companies, in which the assessee was a director, could not be said to be an obligation which, but for such payment, would have been payable by the assessee and in thus holding that the amount of rs. 26,021 Was not the income of the assessee within the meaning of s. 2(24)(Iv) of the it act, 1961?

Counsel Appeared

G.S. Jetly with MRS. Manjula singh & c.K. Krishnan, for the revenue : J.F. Patel with b.V. Jhaveri, for the assessee

T.D. Sugla, J.:

The only question of law we are called upon to answer in this reference under s. 256(1) Of the it act, 1961, is : ” whether, on the facts and in the circumstances of the case, the tribunal was justified in holding that the expenditure on the foreign trips of the assessee’s minor daughters and dr. Madan, met by the companies, in which the assessee was a director, could not be said to be an obligation which, but for such payment, would have been payable by the assessee and in thus holding that the amount of rs. 26,021 Was not the income of the assessee within the meaning of s. 2(24)(Iv) of the it act, 1961?”

It is evident from the question of law itself that the expenditure in question has been incurred by the company of which the assessee is a director on the foreign trips of the assessee’s minor children and a friend by the name of dr. Madan, the break- up of which is as under : shri jetly, learned counsel for the department, strongly relied on the delhi high court decision in the case of cit vs. Nar hari dalmia (1971) 80 itr 454, in support of the department’s case for disallowance. Shri patel, learned counsel for the assessee, on the other hand, submitted that the question squarely covered by this court’s decision in the case of cit vs. Shri rammath a. Podar (1978) 112 ITR 436. Shri jetly, it may be stated, made an attempt to distinguish this court’s decision by pointing out that the foreign tour expenses involved in that case were of the wife, whereas in the instant case these pertain to the foreign tours of minor children and a friend.

The question is, of course, considered in the context of the provisions of s. 2(24)(Iv) of the it act, 1961, which reads as under: “2. (24) ‘Income’ includes—… (Iv) the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by a person who has a substantial interest in the company, or by a relative of the director or such person, and any sum paid by any such company in respect of any obligation which, but for such payment, would have been payable by the director or other person aforesaid.”

On going through this court’s decision in ramnath a. Podar’s case (1978) 112 itr 436, we find that the ratio of the decision is squarely applicable in this case. No doubt, the expenditure involved in that case was that of the wife of the assessee, a director in the company. The reason given for not treating such an expenditure as the income of the assessee is (i) there is no warrant for treating the value of any benefit or perquisite received by the director’s relative as the income of the director, unless there is some legal fiction or a deeming provision by which the value of such benefit or perquisite received by a relative of the director is be regarded as the income of the director, and (ii) the mere fact that the company had met the foreign tour expenses of the assessee’s wife des not automatically lead to the conclusion that the assessee had an obligation to take his wife abroad which, but for the company’s making the payment, the director would have had to bear. As stated earlier, this reasoning is squarely applicable in this case and the decision is binding on this court.

In the result, following this court’s decision in cit vs. Shri ramnath a. Podar (1978) 112 itr 436, we answer the question in the negative and in favour of the assessee.

No order as to costs.

[Citation : 170 ITR 512]