2007 (8) TMI 255 - HC - Income Tax

Tribunal hold that amounts paid by way of travelling allowance to the trustees by the assessee-trust would not be subject to the provisions of rule 6D ITR- held that rule 6D has no application to the facts of the present case contention of revenue that the phrase any other person of rule 6D(2) is wide enough to include even the assessee also, is not acceptable - trustee was not an employee or not akin to an employee & amount paid to trustees by trust could not be disallowed u/r 6D(2)

Summary

Issues:
Interpretation of rule 6D of the Income-tax Rules regarding travelling allowance expenses deduction for a family trust during the assessment year 1982-83.

Analysis:
The High Court was tasked with providing an opinion on whether the amounts paid as travelling allowance to the trustees by the assessee-trust would be subject to the provisions of rule 6D of the Income-tax Rules. The dispute arose during the assessment year 1982-83, where the assessee, a family trust deriving income from the manufacture and sale of medicines, claimed a deduction of Rs. 17,824 as travelling allowance expenses. The Income-tax Officer deemed the claimed amount excessive and invoked rule 6D, allowing a deduction of Rs. 29,965. However, both the first and second appeals concluded that rule 6D did not apply in this case.

The crux of the matter revolved around the interpretation of the phrase "any other person" in sub-rule (2) of rule 6D. The Department argued that this phrase encompassed the assessee as well, making rule 6D(2) applicable. Conversely, the assessee's counsel contended that "any other person" should be limited to individuals akin to an "employee." The court delved into the doctrine of "ejusdem generis," emphasizing that general words following specific ones should be construed as limited to things of the same nature as those specified.

Referring to precedents like State of Karnataka v. Kempaiah and Kamlesh Kumar Sharma v. Yogesh Kumar Gupta, the court highlighted the application of the rule of 'ejusdem generis' in statutory interpretation. Citing CIT v. Modipon Ltd. (No. 1), the court noted that rule 6D does not apply to individuals who are not employees of the assessee, supporting the assessee's stance. Ultimately, the court agreed that the phrase "any other person" should be understood in the context of being an employee, which did not apply to the assessee in this scenario.

Consequently, the court answered the question in the affirmative, favoring the assessee and ruling against the Department, with no order as to costs.