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TMI Blog1987 (4) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... oyees could be treated as a perquisite for the purpose of section 40(c)(iii) of the Income-tax Act ? 2. Whether, on the facts and in the circumstances of the case, the buildings owned by the assessee and allowed to be occupied by the highly paid employees could be treated as business assets of the assessee ? 3. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in treating the bonus paid to the employees as part of the salary instead of treating the same as perquisites under section 40(c)(iii) of the Income-tax Act, 1961 ? 4. Whether, on the facts and in the circumstances of the case, the depreciation on furniture provided by the employer and on the buildings owned by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, 1963, but the original sub-clause was substituted by the Finance Act, 1964, with effect from April 1, 1964. Again, with effect from April 1, 1969, sub-clause (iii) was omitted by the Finance Act, 1968, and in its place, sub-clause (v) was inserted. This sub-clause (v) was in turn replaced by section 40A(5) with effect from April 1, 1972. For the purpose of this case, we are concerned with section 40(c)(iii) as it stood with effect from April 1, 1964. It reads as follows: " 40. Notwithstanding anything to the contrary in sections 30 to 39, the following amounts shall not be deducted in computing the income chargeable under the head 'Profits and gains of business or profession', ........... (c) in the case of any company . ...... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income chargeable under the head 'Salaries' is seven thousand five hundred rupees or less. (Extracted from the book " The Law and Practice of Income-tax", by Kanga and Palkhivala, Seventh Edition, Volume I, page 513) Question No. 1 : The assessee had, for providing residential accommodation to its employees, taken on lease some buildings. It had also provided accommodation to some of its employees in buildings owned by it. During the relevant periods, the assessee claimed the amount spent for repairs of the said buildings as business expenditure. This was disallowed by the Income-tax Officer with reference to section 40(c)(iii), but the Appellate Tribunal has taken a different view. Counsel for the Revenue has relied upon a decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing or such of them as are applicable to the property leased:- (m) the lessee is bound to keep, and on the termination of the lease to restore, the property in as good a condition as it was in at the time when he was put in possession, subject only to the changes caused by reasonable wear and tear or irresistible force, and to allow the lessor and his agents, at all reasonable times during the term, to enter upon the property and inspect the condition thereof and give or leave notice of any defect in such condition ; and, when such defect has been caused by any act or default on the part of the lessee, his servants or agents, he is bound to make it good within three months after such notice has been given or left." In the absence of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the negative, against the Revenue and in favour of the assessee company. Question No. 2 : This question does not arise from the order of the Tribunal and we do not find any facts which have a bearing on this question. We, therefore, decline to answer this question. Questions Nos. 3 and 6.; These relate to payment of bonus and medical expenses already incurred on the employees. Both counsel do not dispute that in view of the decision of this court in CIT v. Warner Hindusthan Ltd. [1986] 160 ITR 217, these are not perquisites. We, therefore, answer question No. 3 in the affirmative and question No. 6 in the negative both against the Revenue and in favour of the assessee. Question No. 4 : Whether the depreciation allowance in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding the effect of section 40(a)(v) as it does not arise in this case. The question is, therefore, answered in the negative, against the Department and in favour of the assessee. Question No. 5 : This relates to the amount spent by the assessee for replacing the crockery and cutlery at the residences of its various officers. The provision of crockery and cutlery is an amenity provided b3, the employer within the meaning of section 40(c)(iii). It is, however, contended by counsel for the assessee that even if it is an amenity, the entire cost of the crockery and cutlery replaced cannot be disallowed and the value of its user alone can be disallowed. We are not able to accept this contention. The company has spent amounts for making ava ..... X X X X Extracts X X X X X X X X Extracts X X X X
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