1984 (7) TMI 51 - HC - Income Tax

Summary

Issues Involved:
1. Whether interest u/s 216 is chargeable for the assessment year 1972-73.
2. Whether cash paid as car allowance to employees is considered a perquisite for computing disallowance u/s 40A(5).
3. Whether cash paid as marriage allowance to employees is considered a perquisite for computing disallowance u/s 40A(5).

Summary:

Issue 1: Interest u/s 216
The court examined whether interest u/s 216 is chargeable for the assessment year 1972-73. The assessee, a company owning tea estates, filed an estimate of its income and paid advance tax based on that estimate. Later, a revised estimate was submitted, and additional tax was paid. The ITO levied interest u/s 216 due to deficiencies in the first two instalments of advance tax. The Tribunal initially allowed proportionate reduction but later rectified its order, upholding the ITO's levy of interest on the difference between the amount paid and the aggregate advance tax. The court clarified that interest u/s 216 is not automatic and requires a specific direction from the ITO, who must exercise discretion considering the aggregate advance tax paid during the year. The court declined to answer this question, leaving it open for the Tribunal to reconsider.

Issue 2: Car Allowance as Perquisite u/s 40A(5)
The court addressed whether cash paid as car allowance to employees is a perquisite for computing disallowance u/s 40A(5). The car allowance was paid in addition to a car supplied to employees. The court noted that a cash payment like car allowance does not fall under the definition of "perquisite" in s. 40A(5)(a)(ii) or as an expenditure in respect of any asset. Instead, it falls under s. 40A(5)(a)(i) as an expenditure resulting in the payment of salary. The court concluded that the car allowance was within the limit prescribed u/s 40A(5)(c) and answered this question in the negative, in favor of the assessee.

Issue 3: Marriage Allowance as Perquisite u/s 40A(5)
The court referred to its earlier decision in CIT v. Toshiba Anand Lamps Ltd. [1984] 145 ITR 563 and answered this question in favor of the assessee and against the Revenue, indicating that the marriage allowance should not be considered a perquisite for computing disallowance u/s 40A(5).

Conclusion:
The court directed that the parties bear their respective costs and forwarded a copy of the judgment to the Income-tax Appellate Tribunal, Cochin Bench.