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TMI Blog1991 (8) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... 0A(5) are to be calculated by applying rule 3 of the Income-tax Rules ?" Correctness of an assessment of a limited company relating to profits and gains of business for the year 1980-81 under the Act is the subject-matter of consideration where permissible deduction towards perquisites provided by the assessee to its employees is to be determined. The assessee filed the return including the perquisites provided to its employees in respect of motor vehicles provided and, for that purpose, computed the same under rule 3 of the Income-tax Rules, 1962. The Income-tax Officer did not accept the return and enhanced the taxable income by Rs. 88,911 towards the perquisites provided to employees computing the same under section 40A(5) of the Act w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he limit specified in respect thereof in clause (c) shall not be allowed as a deduction : Provided that where the assessee is a company, so much of the aggregate of (a) the expenditure and allowance referred to in sub-clauses (i) and (ii) of this clause ; and (b) the expenditure and allowance referred to in sub-clauses (i) and (ii) of clause (c) of section 40. in respect of an employee or a former employee, being a director or a person who has a substantial interest in the company or a relative of the director or of such person, as is in excess of the sum of seventy-two thousand rupees, shall in no case be allowed as a deduction ... (c) The limits referred to in clause (a) are the following, namely: - ... (ii) in respect of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ; (iv) payment by the assessee of any sum in respect of any obligation which, but for such payment, would have been payable by the employee ; and (v) payment by the assessee of any sum, whether directly or through a fund, other than a recognised provident fund or an approved superannuation fund, to effect an assurance on the life of the employee or to effect a contract for an annuity." A plain reading of section 40A(1) makes it clear that, in view of the use of the non-obstante clause "notwithstanding anything to the contrary contained in any other provision of this Act", the provisions in section 40A would prevail over other provisions and such provisions, if inconsistent with section 40A, shall have no application. Mr. A. K. Ray ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was held, that, in view of the non obstante clause in section 40A(1), section 40(c) is controlled by section 40A(5). In the decision of the Calcutta High Court in CIT v. Britannia Industries Co. Ltd. [1982] 135 ITR 35, it was observed (at p. 38) "... it is rightly pointed out by the Tribunal that it would lead to very anomalous situation if the value of the perquisite of the car provided by the assessee-company to the employees was taken at Rs. 150 per month for the purpose of assessment of the employees under the head 'Salaries' and was taken at a different figure for the purpose of working out a ceiling under section 40(c)(iii) in the hands of the assessee-company, which is the employer. We are fully in agreement with the view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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