2001 (7) TMI 35

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..... e meaning of the Banking Regulation Act and is incorporated under the laws of the United Kingdom. III the return filed on December 31, 1976, the assessee has declared the income of Rs.12,25,99,190. The assessment year involved is 1976-77. During the course of the assessment, the Assessing Officer noticed that the assessee has paid excess amount to the employees in terms of section 40A(5). The assessee has in fact claimed the proportionate expenses deductible under section 20(1)(i) of the Act in computing the income under the head "interest on securities" for the purpose of disallowance under section 40A(5). That has been rejected and the Assessing Officer has added back that excess amount in the income of the assessee. In appeal, the Commis .....

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..... t from the limit prescribed for the purpose of disallowance, that has to be disallowed. The provisions of section 40A(5) start with a non obstante clause which contemplates that the provision of section 40A(5) shall have effect notwithstanding anything to the contrary contained in any other provision of this Act, relating to the computation of income under the head "Profits and gains of business or profession". Sub-section (5) of section 40A provides that where the assessee incurs an expenditure which results directly or indirectly in the payment of any salary to an employee or incurs an expenditure which results directly or indirectly in the provision of any perquisite to an employee or incurs directly or indirectly any expenditure or .....

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..... the head "Profits and gains of business or profession". The Explanation below sub-section (2) further provides that for the purposes of this section moneys borrowed" includes moneys received by way of deposits. It is true that the deduction from the interest on securities is allowable under section 20. But how the interest paid to the employee or director can be excluded for the purpose of disallowance under section 40A(5) of the Act. That has nothing to do with the disallowance under section 40A(5). More so, when section 40A(5) starts with a non obstante clause, if any provision is contrary to the provision of section 40A(5) of the Act, the provision of section 40A(5) will prevail over other provision of the Act. In the result, we ans .....

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