1. The assessee is an individual. He is a director in Sayaji Iron & Engg. (P.) Ltd. and Sayaji Iron Works Quarry (P.) Ltd. and is in receipt of salary from these concerns. The ITO during the course of assessment proceedings noticed that the company while issuing salary certificate, had not included the value of car perquisite. The assessee was not having his own car but he was provided with a car by the said companies. Thus the ITO valued the perquisite in accordance with Rule 3(c)(vi) of the Income-tax Rules, 1962 ("the Rules ), at Rs. 5,400. He was also of the view that since the assessee is in receipt of perquisite from the above concerns, the standard deduction under Section 16(i) of the Income-tax Act, 1961 ("the Act"), should be restricted to Rs. 1,000. Accordingly, assessment was completed on 30-12-1978 on a total income of Rs. 94,615.
2. The assessee, being aggrieved with the order of the ITO, took up the matter in appeal and, inter alia, submitted that the employer, namely, the companies, never provided the car for the use of the assessee exclusively for his private or personal purposes also and as such the value of the perquisite was wrongly added in the hands of the assessee at Rs. 5,400 Since the value of the perquisite is not includible in the hands of the assessee, he is entitled to full deduction of Rs. 3,500 from his salary income under Section 16(i).
3. The learned Commissioner (Appeals), after considering the contentions of the appellant and material on record, was of the view that the ITO has found that the assessee has been using the car of the company as and when he likes for his personal purposes also. He also pointed out that company has not shown the value of such perquisite in the salary certificates issued to the assessee. Thus he was of the view that the assessee was provided by the employer the use of the car exclusively for his private or personal purposes also. So he was of the view that the value of such perquisite was to be computed as per Rule 3(c)(vi). According to him, the ITO was correct in making the addition of Rs. 5,400 towards the value of car perquisite. He further held that the ITO was justified in restricting standard deduction to Rs. 1,000 under Section 160). Thus the learned Commissioner (Appeals) agreed with the finding of the learned ITO.4. Before the Tribunal the first contention of the learned counsel of the assessee was that the learned Commissioner (Appeals) was wrong m holding that the employer has provided the use of the car to the assessee exclusively for his private or personal purposes. There is no such agreement between the assesses and the employer. Even the employer in the salary certificate did not show the value of perquisite of the use of the car. If the assessee has used the car for his private and personal purposes, it will not include the benefit or perquisite obtained from the company. Reliance was placed on the decision in the case of CIT v. A.R. Adaikappa Chettiar [1973] 91 ITR 90. Since the assessee was not allowed the use of motor car by the company otherwise than wholly and exclusively in the performance of his duties, the assessee is entitled to full deduction of Rs. 3,500 under Section 16(i).
5. The learned departmental representative supported the order of the learned Commissioner (Appeals) and contended that on the facts and in the circumstances of the case the company impliedly provided the use of the car to the assessee for his private and personal purposes also.
Thus, according to the learned departmental representative, the ITO was justified in making the addition of Rs. 5,400 for car perquisite. It was also contended that the learned Commissioner (Appeals) was correct in sustaining the finding of the ITO regarding the restriction of standard deduction of Rs. 1,000.
6. We have considered the rival submissions and perused the entire material on record. From the orders of the authorities below and looking to the facts of the case, it is clear that the assessee was not having his own car. The motor car was provided to him by the employer for the purpose of the business of the company. The assessee did make use of the car for his private and personal purposes also. While issuing salary certificate to the assessee, the company has not shown value of any perquisite therein. It means that assessee was provided with a car for the discharge of his duties and for the purpose of business of the company.
7. On these facts, whether the unauthorised use of the company's car by the assessee could be called a benefit or perquisite obtained from the company within the meaning of Section 2(24)(iv) which reads as under: "(24) income includes- (iii) the value of any perquisite or profit in lieu of salary taxable under Clauses (2) and (3) of Section 17 ; (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 ; 8. The word "perquisite" is defined in the Oxford Dictionary as "any casual emolument, fee or profit attached to an office or position in addition to salary or wages". Perquisite denotes a personal advantage ; it is something that benefits a man by going "into his own pocket" ; it does not cover a mere reimbursement of travelling or other expenditure incidental to the employment. The import of the word "benefit" had come up for consideration in the case of Owen v. Pook [1969] 74 ITR 147 (HL). Lord Pearce observed that perquisite means a personal advantage but would not include a mere reimbursement. In St. Aubyn v.Attorney-General [1951] 2 All. ER 473 (HL) in considering the meaning of the word "benefit" from a company for the purposes of estate duty, Lord Tucker observed that it will have to be understood and given the normal meaning and as not excluding "other transactions... which, in the circumstances of particular cases, may clearly confer benefits on the deceased in the natural and ordinary meaning of that word".
9. The word "benefit" or "perquisite" obtained from a company would take in, in our opinion, only such benefits or perquisites which the company had agreed to provide and which the person concerned could claim as of right based on some agreement and that a mere advantage derived from the company without its authority or knowledge will not amount to a benefit or perquisite obtained.
10. We may point out that if there is an unauthorised taking of an advantage or a benefit by a director from the company without its authority or knowledge, the company can always insist on the restitution of such advantage or benefit taken by a director and enforce the same legally in a court of law. In such cases, there is a definite obligation to restore the advantage or benefit taken by a director without the authority of the company and it is not possible to hold that such advantage or benefit can be brought to charge under Section 2(24) of the Act. In support of this proposition we are fortified by the ratio of decision in the cases of CIT v. C.Kulandaivelu Konar [1975] 100 ITR 629 (Mad.) and CIT v. Adaikappa Chettiar (supra).
11. We are not in a position to agree with the contention of the revenue that the word "obtained" occurring in Section 1(24) of the Act need not be agreement-oriented, that the word "obtained" merely means "taken" and that if the director is in a position to take a benefit with a view to help himself, even without the authority of the company or against its wishes, he will be governed by the said provision and that both the authorised and unauthorised benefits taken or received are to be treated alike for the purpose of Section 17(2)(iii). If the contention of the revenue is accepted it will mean that the advantage taken by the director or other person without the authority of the company or against the wishes of the company will constitute a benefit or perquisite obtained from the company by such director or other person. If there is an unauthorised taking of an advantage or benefit by a director from the company without its authority or knowledge, the company can always insist on the restitution of such advantage or benefit taken by a director and enforce the same legally in a court of law. In such cases there is a definite legal obligation to restore the advantage or benefit taken by a director without the authority of the company and it is not possible to hold that such advantage or benefit can be brought to charge.
12. In our opinion, before a person can be said to have obtained the benefit or perquisite from a company, there should be some legal or equitable claim, even though it be contingent or contested in nature. A mere receipt of money or property which one is obliged to return or repay to the rightful owner as in the case of a loan or credit, cannot definitely be taken as a benefit or perquisite obtained from the company. The benefit or advantage which might have been taken by a director or other person from a company without any claim of right has to be repaid or returned to the company if the company discovers the unauthorised taking and seeks to enforce its restitution.
13. If we read Section 2(24) and Section 17 it would be clear that in order to be taxable income, the perquisite or benefit should have been authorised by the company and the value of any unauthorised benefit in respect of which the director would be liable to make restitution to the company is not a perquisite. In support of the aforesaid proposition we also get help from Rule 3(c)(i) of the Rules. According to this rule, the value of a motor car provided by the employer for use by the assessee exclusively for his private or personal purposes shall be determined as the sum actually expended by the employer on the maintenance and running of the motor car during the relevant previous year and where the motor car is owned by the employer, as the aggregate of such sum and the amount representing the normal wear and tear of the motor car. Rule 3(c)(ii) provides that the value of a motor car provided by the employer for use by the assessee partly in the performance of his duties and partly for his private or personal purposes shall be determined to be a sum equal to that part of the amount actually expended by the employer on the maintenance and running of the motorcar during the relevant previous year which can reasonably be attributed to the use of the motor car by the assessee for his private or personal purpose.
14. The material on record would clearly go to show that the employer has provided the car to the assessee in the performance of his duties only. There is no material to show that the employer ever agreed that the assessee may use the car for his private or personal purposes. The employer never agreed that the assessee may use the car partly in the performance of his duties and partly for his private or personal purposes.
15. Looking to the aforesaid facts and entirety of the circumstances, we are of the view that in order to attract Sections 2(24) and 17, the benefits or perquisite obtained should be by some sort of arrangement or agreement with the company. The word "benefits" or "perquisites" obtained from a company would take only such benefits or perquisites which the company had agreed to provide and which the person concerned could claim as of right based on such arrangement or agreement. A mere advantage derived from the company without its authority or knowledge will not amount to a benefit or perquisite obtained. The word "obtained", according to the said section, need not be agreement-oriented and cannot merely meant taken. Before a person could be said to have obtained a benefit or perquisite from a company, there should be some legal or equitable claim.
16. The assessee, being director and employee of the company, has used the motor car supplied by the company for his private and personal purposes for which there was no sanction or authority by the company.
Thus the assessee derived advantage from the company without its authority or knowledge and as such it will not amount to a benefit or perquisite obtained as defined in Section 2(24) read with Section 17.
Thus, the learned ITO was wrong in adding the sum of Rs. 5,400 as income of the assessee under Section 17(2).
17. Since the assessee did not obtain any benefit or perquisite as required under Section 2(24)(iv), he is entitled to standard deduction of Rs. 3,500 under Section 16(1).
18. For the reasons discussed above, the finding of the authorities below are not correct. Accordingly, they are cancelled.