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TMI Blog1984 (1) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... diture would have to be considered for deduction with reference to the provisions of s. 37 (1) free of the restriction contained in s. 37(3). A similar issue came up for decision before Madras Bench 'C' of the Tribunal in the case of the assessee here. The Madras Bench found it difficult to agree with the reasoning and conclusion of the Delhi Bench noted supra and suggested that the appeal of the assessee here be heard by a Special Bench. This is how the matter has come up before us. 2. The assessee is a public limited company. It carries on business in hire-purchase finance and has also income from other sources. The previous year ended on 31st December 1979. The first objection relates to the rejection by the authorities below of the assessee's claim for deduction of sur tax liability of Rs. 39,197 from its profits this year. We find that a Special Bench of the Tribunal held that such a deduction was not allowable, in Amar Dye Chem Ltd. vs. ITO (1983) 3 SOT 384 (SB). Following with respect this order of the Special Bench, we reject the assessee's objection in the regard. 3. The next objection is as under: "The Commissioner of Income-tax (Appeals) erred in sustaining the disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew Delhi and Bombay. For the other places visited, e.g. Bangalore, Hyderabad, Madurai etc. Daily Allowance drawn was Rs. 100 per day. G.K. Raman (General Manager) 5761 1561 Total period 28 days. Daily Allowance drawn on the same basis as above. (He visited only Bombay and Delhi S.Raghavan(Secretary and Chief Accountant) 549 249 Total period 2days. Daily Allowance drawn as above. (Visited only Bombay). 6. Counsel emphasised that the expenditure disallowed was not because it has not admissible as business expenditure. It was considered a legitimate business expenditure and would have been allowed u/s 37(1) but for the alleged embargo enacted in s. 37(3). Counsel contends, there is in law no such restriction in s. 37(3) as has been applied here by the authorities below and, according to him, the restriction has been applied only because the authorities missed the true import of the section. Counsel read with us s. 37(3) and r. 6D Sec. 37(3) is reproduced below: "(3) Notwithstanding anything contained in sub-section (1), any expenditure incurred by an assessee after the 31st day of March, 1964, on advertisement or on maintenance of any residential accommodation including any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low. According to him, the crucial word which governs the meaning of the entire provisions including the rule is "travelling". The word occurs in the relevant section as well as the rule by way of phrase "in connection with travelling ". Counsel referred to the meaning of the word "travel" found in the dictionary. In the Concise Oxford Dictionary (5th En.), p. 1382, the following is given : "Travel. (1) Make a journey esp. One of some length to distant countries; pass esp. In deliberate on systematic manner form point to point; move, proceed, in specified manner or at specified rate." The submission is that travelling denotes movement of an individual from Point A to Point B. Expenditure in connection with travel would therefore, mean all the expenditure that is incurred in the process of an individual's progress from Point A, say Madras, to Point B, say Delhi. Once the individual reaches Delhi travelling ceases. Any expenditure that comes to be incurred by the individual after reaching Delhi, whatever may be the nature of he expenditure, cannot be described as expenditure in connection with travelling. To do so would be to ignore the well-settled and commonly understood meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en assuming a different interpretation--adverse to the tax-payer is possible, the construction favourable to the tax-payer must be preferred. Attention is drawn to the decision of the Supreme Court in CIT vs. Naga Hills Tea Co. Ltd. 1973 CTR (SC) 329 : (1973) 89 ITR 236 (SC), where it was held that if a provision of a taxing statute can be reasonably interpreted in two ways that interpretation which is favourable to the assessee has to be accepted. Thus according to the ld. counsel the expenses incurred by the four persons above, after they reached their places of destination including the stay expenses there, could not be considered for disallowance in terms of the section and the rule. Sec. 37(3) as well as the rule, no doubt, specify disallowance of hotel expenses incurred in connection with such travelling. Firstly the phrase "including hotel expenses or allowances paid" qualifies the phrase "paid in connection with such travelling" in s. 37(3). That is to say, in the parent provision itself the concept of travel is limited to the movement i.e. travel from Point A to Point B. The same expressions occur in r. 6D(2) also. Firstly, the rule-making authority cannot overstep the lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred in connection with travelling of employee etc., would, so far as non-journey expenses are concerned cover-only the time spent in hotel/guest houses, rest houses, etc., i.e., the period prior to commencement of and subsequent to the days on which actual business of the employer is conducted outside the headquarters as aforesaid. In this connection, we would also briefly refer to the aspect that a distinction between travelling allowance and daily allowance is maintained in respect of civil servants, who move out form headquarters on tour, even though under the TA and DA Rules, daily allowance is also permissible in respect of the time spent on journeys as well, whether such time is spent actually in transport/vehicle itself or off days when no official business as such is conducted. The said aspect is being mentioned only from the limited view point that travelling allowance and daily allowance are not identical. According to us, the daily allowance admissible to a civil servant on days (including holidays), when such servant is an active actual duty at the stations of tour, would be akin to the periods spent by an assessee's employee, etc., not connected with travelling wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commonwealth Employees' Compensation Act 1930-1962. This section provided that where personal injury by accident is caused to an employee while he is "travelling" to or from his employment by the Commonwealth, the Commonwealth shall be liable to pay compensation as if the accident were an accident arising out of or in the course of his employment. Reliance was placed on this to argue that "travelling" simply meant form proceeding on the business of employer from one place, i.e. headquarters to the place at which the employee so travelling has to conduct the business of the employer. 12. Similarly, counsel referred to the same publication to illustrate the meaning of the phrase "in connection with" occurring in conjunction with the word "travelling" both in s. 37(3) as well as r. 6D. The extract relied upon for this purpose is with regard to the interpretation of s. 10 of the Government Railway Act, 1908 of New Zealand. It empowered the Minister of Railways to fix scales of charges to be paid for goods carried on a railway or stored in any shed, store, etc. "In connection with a railway". The following extract was relied on to point out that in the court's view: "in connection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcise of travelling the moment the employee or other person reached the place of destination; and then revive it from the moment he started his journey back to the head quarters. The Act does not warrant any such sophistry. The words used are plain and there is no room for giving the phrase "in connection with travelling" a wholly new meaning that is not in accordance with the common or accepted usage or understanding of the phrase. 14. On the question of interpretation, Shri Padmanabhan cited several authorities. The sum and substance of his submissions in this regard are: (i) A construction which defeats the very object sought to be achieved by the Legislature must, if possible, be avoided. [CIT vs. S. Teja Singh (1959) 35 ITR 408 (SC)]. (ii) It is true that a taxing provision must receive a strict construction at the hands of the courts and if there is any ambiguity the benefit of that ambiguity must go to the assessee. But that is not the same thing as saying that a taxing provision should not receive a reasonable construction. If the intention of the Legislature is clear and beyond doubt, then the fact that the provision could have been more artistically drafted cannot be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill, 1964 [(1964) 51 ITR (St.) 89] Paragraph 57 of the speech was as follows: "57. I find that the provisions of the Income-tax Act allowing as deductible expenditure amount spent wholly and exclusively for the purpose of business are being abused in respect of certain types of expenditure. Unduly large amount are spent on daily allowance, on unnecessary bookings on planes and trains, on advertisement and on the maintenance of guest houses and suites of rooms in hotels outside the specific places of business, on providing conveyances and in paying high rents for accommodation for their officers and directors and in any other ways. I am afraid this tendency amongst companies is responsible in no small measure for the present high costs and the time has come to put a check at least on some of these expenses. It is not practicable to spell out all the restrictions in detail in the Act itself as some room will always be left for those inclined to evade these provisions to find ways of doing so. I feel it is necessary to have the power to make rules in this behalf where a specific provision is not practicable, A provision has been included in the Finance Bill for this purpose. Subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an Directors and in many other ways. From that point of view, it could be safely said that the expenditure that has been incurred by the assessee here could not have been the object of attack by legislative amendment. But then, in the interpretation of a taxing statute equitable constructions alone do not loom large. The doctrines of beneficial construction and equitable construction have now become obsolete. Courts will decline to interfere for the assistance of person who seek its aid to relieve them against express statutory provisions simply on equitable grounds as modern Acts are framed in the light of equitable as well as legal principles. Modern methods of judicial approach to interpretation of statutes are by and large concerned with the literal rule or (in cases of ambiguity) the mischief rule or(where the grammatical and ordinary sense of the words in the statute leads to some obscurity or inconsistency with the rest of the statute) the "golden rule". It has been argued before us that the language of the section and the rule being clear, a literal or strict construction is called for. The argument for the assessee in essence has been: "in connection with travelling" sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one say in such a case that there is no room for any intendment ? Rowlatt J.'s observations perhaps over simplify the problem which courts often face. It has been contended for both the parties before us that the section as well as the rule were in plain terms and that there was no ambiguity. But then what they understood from the section and the rule was not the same. Here we may consider the decision of the Delhi Bench of the Tribunal supra, to understand what meaning it gave to the relevant provisions. We have looked at the reasoning therein with respect and care. We are, however, unable to accept the interpretation recorded therein because of a major difficulty. The meaning of the phrase "in connection with travelling" we find, has not been examined exhaustively and the different shades of the dispute before us were not presented before the Bench in that case for adjudication. We, therefore, find it necessary to examine the issue afresh in the light of the detailed arguments taken before us. We may at once state here that decisions rendered under other statutes, e.g. under the Regulation of Railway Act of 1889 of U.K. or the Commonwealth Employees' Compensation Act 1930-1962 (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provisions but the speech made by the mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation was enacted. This is in accord with the recent trend in juristic thought not only in Western countries but also in Indian that interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible. In fact there are at least three decisions of this court, one in Loka Shikshana Trust vs. CIT 1975 CTR (SC) 281 : (1975) 101 ITR 234 (SC), the other in Indian Chamber of Commerce vs. CIT 1975 CTR (SC) 271 : (1975) 101 ITR 796 (SC) and the third in Addl. CIT vs. Surat Art Silk Cloth Manufacturers Association (1979) 13 CTR (SC) 378 : (1980) 121 ITR 1 (SC), where the speech made by the Finance Minister while introducing the exclusionary clause in s. 2, cl. (15), of the Act was relied upon by the court for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses of presiding officers and clerks, per mile, is.," Sched., Pt. I, Returning Officers (Scotland) Act, 1891 (54 & 55 Vict.. c. 49), include, and those officials are entitled to their cost of subsistence in an hotel or lodging as well as their railway fare or other expenses of locomotion, so long as the limit of 1 s. Per mile is not exceeded. See now Returning Officers' Expenses (Scotland) Regulations, of 1949 (S.I. No. 1966), Table B, Art. 8." 23. What is of interest here is to note that the phrase "travelling expenses" has been explained in its ordinary acceptance. The phrase includes the whole cost and inconvenience to which a person is put by being absent from home. The basic concept is not movement but the whole cost and in convenience of the person absent from home. Looked at from this light, there is a strong case for the revenue's contention that hotel expenses also have to be considered in a case like the one before us while applying r. 6D. In our view, this contention of the revenue has substance. This view, in fact, is supported by the legislative history as well. There was a defect in the Act previously. Huge expenditure by way of travel costs including hotel booki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt there by the employees and the directors. But from this alone we are unable to accept the claim that the legislative amendment has misfired. In fact, an exactly opposite situation seems to have been brought about. Not infrequently, when Government finds its fundamental fiscal policy being impaired by avoidance (or evasion) with the consequent immunity conferred on social imbalances and tensions, the taxing statute is amended. But often the amendment is in terms of such severity (out of abundant caution) that it catches even the innocent or the reasonable taxpayer. In other words, in seeking to block a loophole, the Legislature often enacts the anti-avoidance provision in such wide language that a tax trap results which catches unintentionally even persons other than those meant to be caught by the provision. In our view, this is what has happened here. To hold that the innocent or reasonable taxpayer must be exempted form such a provision is not given to courts as they cannot "stress and strain the language of the section so as to enable the taxpayer to escape the tax". The remedy can only lie by way of administrative interference. The section and the rule lay down the limits of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed, it would seriously impede the attainment of objectives and progress of business. Those expenses are incurred purely for the purpose of business and fall outside the scope of not only r. 6D but assessment even the Finance Minister's speech made in the parliament. The whole object of introducing a restriction on the allowance of travelling expenditure was to curb lavish expenditure has being incurred on travelling so as to prevent it from resulting the high cost. An expenditure of the type mentioned above could neither to be said to lavish nor unnecessary or resulted in high cost. That should, therefore, be excluded. 2. We feel this is a very relevant bonafide and justifiable contention which needs to be accepted. We are of the view that having regard to the circumstances obtaining before the introduction of this particular provision in the statute,and the provisions of r. 6D, what is sought to be subjected to restrictions is only the daily allowances given for stay in the hotel and that restriction does not impinge upon any other expenditure, though incurred through the medium of the hotel. That the expenditure sought to be disallowed by applying r. 6D and s. 37(3) is limited ..... X X X X Extracts X X X X X X X X Extracts X X X X
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