COMMISSIONER OF INCOME TAX vs. K J DIVATIA

ITR/54/1984HC GujaratGJHC24011729198430 January 1997Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE R.BALIA2 pages

AI SummaryAllowed

What were the facts?

The case concerns assessment years 1978-79 and 1979-80. The assessee's employer paid Rs. 405 and Rs. 455 respectively towards the assessee's club membership fees. The assessee contended these payments were not perquisites and should not be added to his income. The Income Tax Officer (ITO) disagreed, treating the amounts as perquisites and including them in the assessee's total income. The Commissioner of Income Tax (Appeals) upheld the ITO's order. The Income Tax Appellate Tribunal (ITAT) then held that the employer paid the fees for business benefit and the assessee joined the club for business purposes, thus no perquisite was received by the assessee.

What did the High Court hold?

The High Court held that the Tribunal was correct in its conclusion. The Tribunal had found as a fact that the club fees were paid by the company for the benefit of its business, with the objective of maintaining cordial business relationships. The Tribunal also found that the assessee joined the club for business purposes. The High Court noted that there was no challenge to the Tribunal's finding that the expense was incurred by the company for business benefit. Therefore, the membership fees paid by the employer could not be treated as a perquisite of the assessee and were not liable to be included in the assessee's income for the assessment years in question. The question referred to the court was answered in the affirmative, in favour of the assessee and against the revenue.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that the amount of membership fees of the assessee paid by the employer of the assessee to the clubs was not perquisites, and liable to be included in the income of the assessee? (Question of law) Assessee's Contention: The assessee argued that the club membership fees paid by the employer were not perquisites and therefore should not be added to his income. Revenue's Contention: The revenue, through the ITO and CIT (Appeals), contended that the payments constituted perquisites and were includible in the assessee's income. The judgment does not explicitly detail the revenue's arguments before the High Court, but their stance was that the payments were perquisites.

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 54 of 1984

For Approval and Signature:

Hon'ble MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE R.BALIA. ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements?

To be referred to the Reporter or not?

Whether Their Lordships wish to see the fair copy of the judgement?

Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

Whether it is to be circulated to the Civil Judge?

The order continues below.

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