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TMI Blog1990 (6) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... d cars. This was affirmed by the Commissioner of Income-tax (Appeals). But, in second appeal, the Income-tax Appellate Tribunal, purporting to follow the decision of the Calcutta High Court in CIT v. Britannia Industries Co. Ltd. [1982] 135 ITR 35, held that the Income-tax Officer has not considered the total use of the cars vis-a-vis the use of the cars relating to the personal use of the employees, that he had not given any details as to how he worked out the disallowance under section 40A(5) of the Act and, in these circumstances, the Appellate Tribunal directed the Income-tax Officer to value the perquisite by way of the cars provided by the assessee to its employees as per rule 3(c)(ii) of the Income-tax Rules and consider the disallowance under section 40A(5) of the Act. It is thereafter at the instance of the Revenue that the question of law formulated hereinabove has been referred for the decision of this court. We heard counsel. Section 40A(5) of the Income-tax Act provides as follows : "40A. Expenses or payments not deductible in certain circumstances. - . . (5) (a) Where the assessee (i) incurs any expenditure which results directly or indirectly in the payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. The limit regarding deduction in respect of salary, perquisites and fees in the hands of the employer/assessee was originally dealt with by section 40(c)(iii) for the assessment years 1963-64 to 1968-69, and, thereafter,by section 40(a)(v) for the assessment years 1969-70 to 1971-72. From the assessment year 1972-73 onwards, the matter is dealt with by section 40A(5) of the Income-tax Act. It should be remembered that the language and context in which section 40(c)(iii) occurred, as also the subsequent section 40(a)(v) is a little different from the language and setting of section 40A(5) of the Income-tax Act. It is also worthwhile to note that the decision of the Calcutta High Court, relied on by the Appellate Tribunal, in CIT v. Britannia Industries Co. Ltd. [1982] 135 ITR 35 centred round section 40(c)(iii) of the Income-tax Act, 1961, as it stood then, read along with rule 3(c)(ii) and rule 6D of the Income-tax Rules, 1962. In that case, the court held that the value of the perquisite by way of free car provided to an employee should be taken in the hands of the employer-assessee, for the Purpose of section 40(c)(iii), at the same figure as it was taken in the hands of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (v) of clause (2) of section 17 ; (g) the amount of any compensation referred to in sub-clause (i) or any payment referred to in sub-clause (ii) of clause (3) of section 17; (h) any payment referred to in clause (iv) or clause (v) of subsection (1) of section 36 ; and (i) any expenditure referred to in clause (ix) of sub-section (1) of section 36 : Provided further that nothing in this sub-clause shall apply to any expenditure which results directly or indirectly in the provision of any benefit or amenity or perquisite to an employee whose income chargeable under the head 'Salaries' is seven thousand five hundred rupees or less. Explanation 1.-The provisions of this sub-clause shall apply notwithstanding that any amount not to be allowed under this sub-clause is included in the total income of the employee. Explanation 2. -In this sub-clause, the word 'salary' shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule." (We have extracted section 40A(5) of the Income-tax Act, 1961, earlier in this judgment). A perusal of the above sections will highlight the difference in the statute from time to time (at three different stages). Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given by the Income-tax Appellate Tribunal as aforesaid. We are of the view that the Appellate Tribunal probably proceeded on the basis that the decision of the Calcutta High Court in Britannia Industries Co. Ltd.'s case [1982] 135 ITR 35, is squarely applicable herein and, on that basis, issued the direction contained in para 4 of the appellate order. It is evident that the Appellate Tribunal failed to note that in Britannia Industries Co. Ltd.'s case [1982] 135 ITR 35, the Calcutta High Court was concerned with section 40(c)(iii) of the Income-tax Act as it stood then. It is plausible to take the view that the non-deductibility of the expenditure or of the allowance in the hands of the company (employer) is not to be affected in any way by the consideration that the remuneration or benefit or amenity or privilege is included as a perquisite in the hands of the employee-recipient and is taxable. The objects of section 40A(5) of the Act and rule 3(c)(ii) of the Rules are distinct and different. Prima facie, it appears to us that section 40A(5) of the Act is intended to effectively check the extravagant expenditure by the employer. On the other hand, rule 3(c)(ii) of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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