9911796707
TMI Blog1977 (1) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... one into account and not the bonous and other allowances paid to the employees. 3. When the matter was taken on appeal, the Appellate Assistant Commissioner considered the issue in detail and the operative part of his order reads as under: "9. Summing up: The Income Tax Officer is directed to recompute the permissible allowance taking bonus as part of the salary, dearness allowance to be taken if it has to be treated as part of salary as per terms of employment, city and city compensatory allowances not to be taken as perquisite for purpose of disallowance (need not also be taken as part of salary for restricting to the extent of 20%), taking that part of the car allowance which has been taxed as perquisite in the hands of the employees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs Ltd(1). Wherein it has been held that bonus is part of salary. 6. The learned Departmental Representative, on the other hand, contended that what is contemplated under s. 40 (c)(iii)/40 (a)(v) of the Act is that a part of the perquisite or benefits or amenities accruing to the employees will have to be disallowed. It was submitted that payment of bonus, dearness Allowance, city allowance, house rent allowance and entertainment allowance gave a positive benefit or amenity to the employees and as such the directions given by the Appellate Assistant Commissioner to re-work the perquisites allowable cannot be sustained. In the circumstances, it was submitted that the orders of the Income Tax Officer in this case for all the four years shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to in sub-clause (i) or any payment of tax referred to in sub-clause (iii) of clause (6) of that section or any sum referred to in clause (iii) of sub-section (1) of s. 17 or in clause (v) of sub-s.(2) of that section of the amount of any compensation referred to in clause (ii) of sub-s. (3) of that section or any payment referred to in clause (iv) or clause (v) or any expenditure referred to in clause (ix) of sub-s. (1) of section 36 shall not be taken into account." Sri Swamy, the learned counsel appeared on behalf of the assessee has submitted that what is to be disallowed in terms of the above clause (iii) is only any benefit or amenity which must be essentially in kind and does not cover cash payment. In support of his argument, he l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enches. In the circumstances, we see no reason to differ from the view taken by the Benches that sub-clause (iii) of clause (c) of s. 40 of the Act does not cover cash payment. The words on which stress is laid by the learned counsel on behalf of the assessee to point out that only benefits in kind are to be included therein and that it does not contemplate inclusion of cash payment. Sri Swamy also gave one reason and we think that reason has some bearing as to why sub-clause (iii) contemplates only disallowance of benefits in cash. The reason is that all payments in cash are to be taken into account while assessing the salary income of the employee as per sub-s. (3) of s. 17. Perhaps for the same reason the proviso also specifically mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate Assistant Commissioner is correct in holding that bonus and dearness allowance should be treated as part of the salary in view of the contract of service and this view finds support from the recent decision of the Madras High Court in the case of Commissioner of Income-tax, Madras vs. India Radiators Ltd. (1) City allowance, City compensatory allowance and car allowance cannot be considered as perquisites as they are cash allowances paid. Hence we hold that none of the above allowances can be subject to any disallowance under s. 40(c) (iii)/40 (a) (v) of the Act. 8. In the result, the appeals filed by the assessee for all the four years are allowed and the departmental appeals for all the four years are dismissed. - - TaxTMI - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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