Gujarat High Court
Commissioner Of Income-Tax vs Kamalini Gautam Sarabhai on 14 March, 1993
Equivalent citations: [1994]208ITR139(GUJ)
JUDGMENT G.T. Nanavati, J.
1. The following question has been referred to this court by the Income-tax Appellate Tribunal under section 256(1) of the Income-tax Act, 1961 :
"Whether, on the facts and in the circumstance of the case, the expenditure of Rs. 39,753 incurred by Messrs. Karamchand Premchand Pvt. Ltd. on the foreign tour of the assessee is not includible as income under section 2(24)(iv) of the Income-tax Act, 1961, in the computation of total income of the assessee ?"
2. For the assessment year 1972-73, the assessee filed a return of income disclosing a total income of Rs. 81,289. The assessment was completed on March 10, 1975. Later on, the Income-tax Officer, during the course of assessment of Messrs. Karamchand Premchand Pvt. Ltd., came to know that the said company had incurred expenditure on the foreign tours of one of its directors, Gautam Sarabhai, and his wife, Smt. Kamalini, the assessee. He also noticed that for the tour of Smt. Kamalini, the company had expended Rs. 39,753. In view of this information, the Income-tax Officer reopened the assessment and ultimately included the said amount of Rs. 39,753 in total income of the assessee and assessed it accordingly. The assessee then preferred an appeal to the Appellate Assistant Commissioner but the same was dismissed as the Appellate Assistant Commissioner was of the view that there was no material to show that she had gone abroad for the purpose of business of the company and, therefore, she can be said to have obtained benefit to the extend of Rs. 39,753. The assessee then preferred an appeal to the Tribunal. The Tribunal held that it cannot be said on the basis of the material on record that the assessee had ever approached the company either directly or though any one else for obtaining the benefit or perquisite in question. Therefore, the first part of section 2(24)(iv) was not attracted. The Tribunal also held that there was no material to show that if the sum in question had not been paid by the company, it would have become payable by the assessee's husband, who was a director of the company. Therefore, the second part of section 2(24)(iv) was also not attracted. The Tribunal therefore, allowed the appeal and directed that the said sum be excluded from computation of the assessee's total income. The Revenue, feeling aggrieved by the said order, then moved the Tribunal for referring the abovestated question to this court.
3. What is connected by learned counsel for the Revenue is that it was found as a matter of fact by the Appellate Assistant Commissioner, in the absence of any evidence on record, that the assessee had not gone abroad for the business purpose of the company. He submitted that this finding has not been disturbed by the Tribunal. The Tribunal has allowed the appeal because it was of the view that the benefit or perquisite was not obtained by the assessee inasmuch as it was not possible to say that she had made any attempt to procure the same. Thus, the finding that she had received benefit as the said foreign tour was taken for the business purpose of the company has not been upset by the Tribunal and no question as regards that findings of fact has been referred to this court and, therefore, it is not open to us to consider whether she derived any benefit or not.
4. In our opinion, this contention is really misconceived. The question whether the assessee can be said to have received any benefit or not is a mixed question of law and fact as what this court has to decide is whether, on the facts found, she can be said to have received a benefit as contemplated by section 2(24). The Tribunal has found, as a matter of fact, that she had not approached the company either directly or though any one else. Whether she got any advantage or gain was neither considered by the Appellate Assistant Commissioner nor by the Tribunal as, possibly, this aspect was not brought to their notice. The Appellate Commissioner proceeded on the basis that since the foreign tour was not undertaken for the purpose of business of the company, it was for the benefit of the assessee. The tribunal proceeded on the basis that the said benefit in any case cannot be said to have been obtained by the assessee inasmuch as she had not made any attempt to procure the same. It is, therefore, open to us to consider whether, in view of the facts found, the assessee can be said to have received any benefit as contemplated by section 2(24)(iv).
5. It was next urged that the assessee was admittedly a relative of the director. The expenses of her foreign tour were borne by the company. Thus, she did derive benefit of the foreign tour and that benefit was obviously obtained from the company in which her husband was a director. Thus, all the ingredients necessary for considering the benefit as income of the assessee were satisfied in this case. It was also submitted that we should not interpret this provision in a manner which would result in avoidance of tax.
6. Section 2(24) defines the term "income". It is an inclusive definition and clause (iv) of that definition reads as under :
"the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by person who has a substantial interest in the company, or by a relative of the director or such person, and may 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."
7. The first part of clause (iv) refers to any benefit or perquisite obtained from a company either by a director or any person who has a substantial interest in the company or by a relative of the director or such persons. The second part refers to 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 any person referred to in this clause. Therefore, the first part refers to the benefit or perquisite obtained by an assessee from a company, whereas the second part refers to a sum paid by such company to a third person.
8. In view of the rival contentions raised before us, what we are required to consider is whether by undertaking the foreign tour, the assessee can be said to have obtained any benefit from the company in which her husband was a director. The answer would obviously depend upon the true interpretation of the word "benefit" occurring in the first part of the said clause. The clause refers to "benefit obtained from a company". Thus, the context in which such word has been used will have to be borne in mind while interpreting the word "benefit". The dictionary meaning of the word "benefit" is advantage or profit or anything contributing to improvement of condition. If a person derives any advantage, it can be said that he was benefited. If he gains something either monetarily or otherwise it can be said that he was benefited. If he is able to improve his condition, it can be said that he has benefited to that extent. Thus, the word "benefit" implies an element of advantage, profit or gain. Moreover, the word "benefit" occurs in a provision which treats the benefit given by a company as income of the person who can be said to have obtained it with the result that it would become taxable in his hands. Considering all these aspects, were are of the opinion that the word "benefit" occurring in clause (iv) would mean "any advantage, gain or improvement in condition" and only if such a thing is obtained by an assessee from a company and if the other conditions are satisfied, then and then only can the value of it treated as his income.
9. The material on record discloses that earlier also, the assessee had gone on foreign tours. Though it is not clear on how many occasions she had gone along with her husband for the purpose of business of the company, the purpose for which she had undertaken the last two tours becomes apparent from the record of the case. As stated earlier, it is found as a matter of fact that the assessee had not approached the company either directly or indirectly for going on those foreign tours during the relevant years. From the material which was produced before the Income-tax Officer and in respect of which there is no dispute and also the statement of case, it appears that she had gone on those foreign tours at the instance of the company and for the purpose of business of the company. The application which was made to the Reserve Bank of India and which was produced before the Income-tax Officer disclosed the reason why she requested to go on those tours. It was stated in the application that :
"It is very essential that in order the best results for negotiations at top level with foreign corporations, the relationship has to be built up. It is therefore necessary that the chairman of the company, Shri Gautam Sarabhai, is accompanied by his wife during his present tour also."
10. The last tour was for a period of fifteen days and the earlier tour was for a period of three weeks. There was no material to show that it was a pleasure tour arranged by the company for the assessee. It is difficult to appreciate how in view of these facts and circumstances, it can be said that by undertaking these foreign tours, she had derived any advantage or personal gain or that she had benefited in any other manner so that the whole expenditure incurred for these tours can be regarded as her income. We are of the opinion that the case of the assessee was certainly not covered by the first part of the said clause.
11. In the alternative, it was contended that the case of the assessee would be covered by the second part of the clause. In our opinion, this contention is also misconceived. As pointed out above, by undertaking these foreign tours, the assessee had not incurred any obligation. She had undertaken the tours at the instance of the company and for the purpose of the business of the company. For undertaking such foreign tours, neither had she incurred any obligation incurred by her husband who was a director of the company. For this reason, even the second part was attracted in this case. The tribunal was, therefore, right in holding that the expenditure of Rs. 39,753 incurred by Karamchand Premchand Pvt. Ltd. on the foreign tours was not includible as income under section 2(24)(iv) of the Act in the computation of the total income of the assessee.
12. For the reasons stated above, we answer the question in the affirmative, that is against the Revenue and in favour of the assessee. Reference is disposed of accordingly. No order as to costs.