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Issues involved: The disallowance of leave allowance payments made by a public limited company to its employees for assessment years 1968-69 to 1971-72 under section 40(c)(iii) and section 40(a)(v) of the Income-tax Act, 1961.
Summary: The High Court of Madras considered the disallowance of leave allowance payments by an Income Tax Officer (ITO) to employees of a public limited company for assessment years 1968-69 to 1971-72. The ITO disallowed the amounts, viewing them as salary, benefit, or perquisite under section 40(c)(iii) or section 40(a)(v). The Appellate Authority Commissioner (AAC) upheld this view, but the Tribunal ruled that the cash payments as leave allowance were not salary, benefit, amenity, or perquisite, deeming the disallowance improper. The revenue sought a reference on whether the leave allowance was not a perquisite, leading to two questions being referred to the court. The Calcutta High Court had previously decided that direct cash payments to employees could not be considered perquisites under the Income-tax Act, 1961. The Supreme Court had dismissed similar petitions regarding bonus, house rent allowance, and conveyance allowance as perquisites. The Madras High Court, in a previous case, held that a perquisite must be a non-cash benefit under the Indian I.T. Act, 1922. The court found no contrary views and ruled in favor of the assessee, answering the questions in the affirmative and against the revenue, with no costs awarded.
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