JUDGMENT
1. These are two references under Section 256(1) of the Income-tax Act, 1961, in which the Income-tax Appellate Tribunal, Allahabad, has referred the following identical questions of law for the opinion of this court :
"Whether, on the facts and in the circumstances of the case and on a proper interpretation of Rule 3 of the Income-tax Rules, 1962, and Section 2(24)(iv) of the Income-tax Act, 1961, the Tribunal was justified in holding that the value of the perquisite of free imported car with chauffeur provided to the assessee by J. K. Cotton Spinning and Weaving Mills Limited in which he was a director should be the same as in the case of an employee of the company ?"
2. The aforesaid question arises out of the Tribunal's orders dated January 17, 1981, and June 26, 1981, passed in ITA Nos. 1091 and 1919 of 1980 for the assessment years 1976-77 and 1977-78, respectively.
3. We have heard Sri Shambhu Chopra, learned counsel for the Commissioner, and Sri V K. Uppadhya, learned counsel for the respondent.
4. The facts are that the assessee, the late Sir Padampat Singhania, was the chairman of the board of directors of J. K. Cotton Spinning and Weaving Mills Ltd., Kanpur. The said company provided him free use of an imported car with driver. The respondent-assessee returned the value of the said perquisite at Rs. 6,600 in both the years. The said sum was arrived at by determining the value of the perquisite in accordance with Rule 3 of the Income-tax Rules, 1962. The Assessing Officer, however, did not accept the same. He found that the assessee was not an employee of the company and, therefore, Rule 3 was not applicable and since no other details were furnished, he estimated the value of the perquisite at Rs. 18,000 for the assessment year 1976-77. The Commissioner of Income-tax (Appeals) reduced the estimate of the value to Rs. 15,000 while the Tribunal took the view that the value could be determined on the same basis as contained in Rule 3 and, therefore, had reduced the estimate of the value to Rs. 6,600. For the assessment year 1977-78, the Assessing Officer estimated the value at Rs. 15,000 which was upheld by the Commissioner of Income-tax (Appeals) and the Tribunal following its order for the assessment year 1976-77, reduced the value to Rs. 6,600.
5. Under Section 2(24)(iv) of the Income-tax Act, 1961, 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 ... is includible in such director's income. This proposition is not in dispute and it was also not disputed that Rule 3 in terms applies to the determination of the perquisite value only in respect of the persons whose income is chargeable under the head "Salaries". It was, thus, contended on behalf of the Commissioner that the said Rule applies only to an employee even though such an employee may be a director of the company. Since the assessee was not an employee, Rule 3 could not be invoked. The relevant part of Rule 3 dealing with the valuation of the perquisite value of a vehicle is as under :
"(c)(i) 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 (including remuneration, if any, paid by the employer to the chauffeur) 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 ;
(ii) 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 motor-car during the relevant previous year {including remuneration, if any, paid by the employer to the chauffeur) which can reasonably be attributed to the user of the motor-car by the assessee for his private or personal purposes or, where the motor-car is owned by the employer, the aggregate of such sum and of a sum equal to that part of the amount representing the normal wear and tear of the motor-car which can reasonably be attributed to the user of the motor-car by the assessee .for his private or personal purposes ; so, however, that where a determination on the basis mentioned above presents difficulty, the value of the perquisite may be determined on the basis provided in the Table below :
TABLE 1 Value of perquisite per calendar month 2 3 Where the h.p. rating of the car does not exceed 16 or the cubic capacity of the engine does not exceed 1.88 litres Where the h.p. rating of the car exceeds 16 or the cubic capacity of the engine exceeds 1.88 litres Rs.
Rs.
Where the motor-car is owned or hired by the employer and all the expenses on maintenance and running are met or reimbursed to the assessee by the employer 300 400 (2) Where the motor-car is owned or hired by the employer but the expenses on maintenance and running for the assessee's private or personal purposes are met by the assessee 100 150 Provided that where a chauffeur is also provided to run the motorcar, the value of the perquisite as calculated in accordance with this Table shall be increased by a sum of Rs. 150 per month."
6. Thus, even in the case of an employee to whom a car has been provided by an employer exclusively for his private or personal purposes, the whole of the expenditure on the maintenance and running of the motor vehicle has to be taken to be the value of the perquisite. Where, however, the car is partly used for the performance of official duties and partly for private or personal purposes, the amount is to be distributed proportionately and where such determination is not possible the formula given in the Table has to be adopted. No separate Rule has been framed for the determination of the perquisite value of a vehicle in the case of a director who is not an employee of the company and it was probably because in view of Rule 3, there was no necessity for a separate Rule and the same standard could be applied in the case of a director. In the present case, the Assessing" Officer was unable to obtain the details of the actual expenditure incurred by the company on the maintenance and running' of the car. He has also not mentioned whether the car was exclusively for personal use of the asses-see or for use for the purposes of the company as a managing director as also for his private use. So much so that the Assessing Officer did not even gather information about the type of the car and he has used a vague reference as imported car. It was, thus, a case where a determination on the basis mentioned in Rule 3(c)(i) and (ii) presented a difficulty for want of the basic details that the Tribunal seems to have accepted the value at Rs. 6,600 which seems to have been determined by applying the formula contained in the Table, reproduced above. There being no other method that could be applied, in the facts of the case the Tribunal's acceptance of the value determined in accordance with Rule 3 was justified.
7. For the above reasons, we answer the aforesaid question in the affirmative, i.e., in favour of the assessee and against the Revenue.