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Issues involved: The judgment involves the question of whether bonus and depreciation on a flat provided to the director of the assessee-company constitute a perquisite under section 40(a)(v) of the Income-tax Act, 1961.
Bonus Issue: The judgment refers to the assessment year 1971-72 and states that the Tribunal was correct in holding that bonus is not a perquisite under section 40(a)(v) of the Income-tax Act, 1961, based on a previous court ruling. Depreciation on Flat Issue: Concerning the assessment year 1970-71, the judgment discusses the case where a flat was rented by the assessee and provided to its director. The Income-tax Officer disallowed depreciation claimed on the flat as a perquisite under section 40(a)(v). However, the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal both ruled in favor of the assessee. Legal Interpretation: The judgment delves into the interpretation of section 40(a)(v) of the Income-tax Act, 1961. The Revenue argued that depreciation allowance falls within the scope of this section, citing a judgment from the Kerala High Court. The assessee contended that depreciation allowance is not covered by section 40(a)(v) based on the wording of the provision. Memorandum Explanation: The judgment also examines the Memorandum explaining the provisions of the Finance Bill, 1968, which aims to limit expenditure or allowance admissible to the employer in respect of assets provided to employees free of charge. The assessee's counsel highlighted this explanation to support their argument. Decision: The court concluded that bonus is not a perquisite under section 40(a)(v) based on precedent. Regarding the depreciation on the flat provided to the director, the Tribunal should have allowed it only to the extent not covered by section 40(a)(v). The assessee was directed to pay the costs of the reference to the Revenue.
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