9911796707
TMI Blog1997 (10) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... red on the maintenance of the flat at Bombay and depreciation on the said building should be allowed as a deduction even though it is a guest house within the meaning of section 37(3) of the Income-tax Act, 1961? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the provision for gratuity should be allowed as a deduction even though there was no approved gratuity fund in existence during the previous year relevant to the assessment year 1975-76 ?" The answer to the second question need not detain us as the Tribunal has followed its earlier order for the assessment year 1973-74 in the assessee's own case and by our judgment in Tax Cases Nos. 220 and 221 of 1981 (Carborandum Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee for its employees, who were in tour in connection with the assessee's business to Bombay and, therefore, the said flat could not be regarded as a guest house and the assessee would be entitled to the maintenance expenditure as well as the depreciation on the said flat. It is now necessary to notice the order of the Appellate Tribunal in I.T.A. No. 1555/Mds. of 1976-77, dated December 21, 1978, rendered for the assessment year 1973-74. In the said order, the Appellate Tribunal noticed the findings of the Appellate Assistant Commissioner for the assessment years 1971-72 and 1972-73 dated February 13, 1978, and the Tribunal found that the log book showed that some non-employees used the flat though the expenditure on such user ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 37 of the Act. According to learned counsel for the Revenue, sub-section (5) of section 37 of the Act was only retrospective in nature and would apply for the assessment year 1975-76. His further submission is that the Appellate Tribunal overlooked the proviso to section 37(4) of the Act and under the proviso, if the assessee maintained the guest house as a holiday home and if the guest house is intended for the exclusive use or benefit of the employees while on leave only, that guest house maintained as a holiday home will not be regarded as a guest house within the meaning of sub-section (4) of section 37 of the Act. Mr. R. Balasubramanian, learned counsel for the assessee, on the other hand, submitted that the finding of the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any who have to visit it for the purpose of the company's business, then any expenditure incurred for the maintenance of such accommodation cannot be brought within the scope of section 37(3) of the Act. This court also held that the expression, "guest" did not comprehend the employees and the employees could not be regarded as strangers so as to be regarded as guests. Finally, this court held that unless a guest house is intended for use by a complete stranger, it cannot be called a guest house which falls within the scope of section 37(3) of the Act. We have already seen the finding of the Appellate Tribunal in the instant case that the apartment was made for the assessee's employees and the said finding was arrived at on the basis of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of considering the applicability of the proviso to sub-section (4) of section 37 of the Act does not arise. In so far as the retrospective effect of sub-section (5) of section 37 of the Act is concerned, it is relevant to notice that the said sub-section was introduced by the Finance Act, 1983, with retrospective effect from April 1, 1979. It is no doubt true that the Bombay High Court in Ocean Carriers Pvt. Ltd.'s case [1995] 211 ITR 557 came to the conclusion that the provisions of sub-section (5) of section 37 of the Act are retrospective in nature and would apply even to the assessment year 1977-78. Sub-section (5) of section 37 provides that any accommodation, by whatever name called, maintained, hired, reserved or otherwise arrang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation 2 to sub-section (2A) of section 37 the Act. The Supreme Court found that insertion of Explanation 2 though began with the expression for the removal of a doubt, the same expression as found in sub-section (5) of section 37 of the Act, was not fully retrospective as the insertion was made with restricted retrospective operation with effect from April 1, 1976. The apex court, therefore, held that partial retrospective effect was given to indicate that its application prior to April 1, 1976, was excluded. Applying the same ratio, when the Finance Act, 1983, inserted sub-section (5) of section 37 of the Act with retrospective effect from April 1, 1979, its operation prior to April 1, 1979, would be excluded as it was necessary to ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
