COMMISSIONER OF INCOME TAX Vs. PREM NARAIN AGGARWAL

JUDGEMENT

(1.) THE question referred to us in relation to the assessee, which is an HUF, relates to the asst. yr. 1962 -63. The question is in the following terms:

(2.) THIS question has arisen because the shares of the HUF were held in the name of Shri Prem Narain Aggarwal, as Karta of an HUF, who also happened to be the managing director of M/s Koolaire (P) Ltd. The ITO had treated the amount of rights shares or bonus shares, which had come to the HUF from several companies, as being perquisites obtained by Shri Prem Narain Aggarwal within the meaning of S. 2(24)(iv) of the INCOME TAX ACT, 1961. That section states that when any benefit or perquisite, whether convertible into money or not, is 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, then that sum is to be treated as income. The definition also includes within its scope payment of any other amount which would normally have been paid by the director or other persons personally. The ITO treated the issue of bonus and rights shares as perquisites obtained by the Karta of the assessee on behalf of the assessee and hence included a substantial sum in the income of the assessee. In other words, the Karta happened to be a director or managing director of some companies, he also received bonus or right shares in respect of shares he was holding on behalf of the HUF. The receipt of these shares was treated as a perquisite. The value of the shares was added to the income. The addition was struck out by the AAC, which striking off was upheld by the Tribunal. It has led to the question being asked only with respect to the shares of M/s Koolaire (P) Ltd. for the year under consideration.