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TMI Blog1998 (4) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 6,69,440. The Income-tax Officer completed the original assessment for the two assessment years on December 15, 1977, and March 4, 1978, respectively. The assessee along with the returns filed for those assessment years, filed statements showing the amounts of expenditure disallowable under section 40A(5) of the Income-tax Act, 1961 (hereinafter to be referred to as "the Act"), in respect of a house utilised by its deputy chairman free of rent and in the statements filed along with the returns, the assessee had shown the salary and allowance to the deputy chairman as Rs. 60,000, 20 per cent. thereof being Rs. 12,000 and the money value of perquisite was shown as Rs. 7,500 and claimed "nil" the excess over 20 per cent. of the salary. The Income-tax Officer on the basis of the information furnished by the assessee, completed the original assessment for the two assessment years, in question. The Income-tax Officer subsequently came to know that the assessee had incurred certain expenditure on the property belonging to the company in which the deputy chairman was allowed to reside and the expenditure incurred on the building for the two assessment years was as under : ------ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it and the assessee had not disclosed the fact that the property was used by its deputy chairman for his personal purposes in the statement filed by the company and furnished the amount disallowable under section 40A(5) of the Act. The Tribunal, therefore, came to the conclusion that the Income-tax Officer has jurisdiction to reopen the assessment proceedings. On the merits of the case, the Tribunal held that the expenditure incurred towards property tax, electricity charges, repairs and depreciation should be included in arriving at the amount disallowable under section 40A(5) of the Act. The Tribunal followed a decision of this court in the case of CIT v. Kisenchand Chellaram (India) P. Ltd. [1981] 130 ITR 385 and a Full Bench decision of the Kerala High Court in the case of CIT v. Forbes, Ewart and Figgis (P.) Ltd. [1982] 138 ITR 1 and came to the conclusion that the expenditure incurred by the assessee would fall within the scope of section 40A(5) of the Act and as the amount exceeded the limit prescribed in the said section, the amount was to be disallowed to the extent to which it was in excess of the limit prescribed for allowance. The assessee has challenged the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Tribunal clearly show that the assessee had not disclosed material facts before the Income-tax Officer at the time of original assessment proceedings to determine the amount to be disallowed under section 40A(5) of the Act. It was found that the assessee had not even disclosed the fact that the asset was used or allowed to be used by the deputy chairman for his personal use in the statement filed along with the return. The assessee, no doubt, might have claimed the expenditure incurred by the assessee on the house and had shown the same in the profit and loss account filed along with the return, but is was not shown separately, but as part of the business expenditure of the company and claimed as a deduction. There was no itemwise classification of the expenditure. In the column with reference to the amounts which are disallowable under section 40A(5) of the Act, the assessee had not shown various types of expenditure incurred by the assessee on the house used by the deputy chairman free of rent. The facts as found by the Appellate Tribunal clearly show that the assessee had neither disclosed in the statement filed along with the return, nor informed the officer during the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance expenditure incurred on the house used by the director or by the employee of the assessee would also be subject to the ceiling limit under section 40A(5) of the Act. The electricity charges were incurred by the assessee on the house used by the deputy chairman for his own purposes. Therefore, that would also be subject to the ceiling limit under section 40A(5) of the Act. In so far as the third item, namely, the expenditure on repairs is concerned, learned counsel for the Revenue relied upon a decision of the Karnataka High Court in the case of CIT v. Motor Industries Co. Ltd. (No. 2) [1998] 229 ITR 137, wherein the Karnataka High Court held that the normal repair expenses cannot be added under section 40A(5) of the Act and only the repair expenses to meet special requirements of the employee in occupation can be added under section 40A(5) of the Act. We are of the opinion that the decision of the Supreme Court in C. W. S. (India) Ltd. v. CIT [1994] 208 ITR 649, would apply to the expenditure on repairs as well. The Supreme Court in the said decision held that the maintenance expenses incurred on the asset used by an employee would also be subject to the ceiling limit prescrib ..... X X X X Extracts X X X X X X X X Extracts X X X X
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