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TMI Blog1982 (7) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... wered by holding that the borrowed capital will have to be deducted from the computation of capital for the purpose of s. 80J. The question is, therefore, answered in the negative, in favour of the Revenue and against the assessee. The second question which arises for consideration in respect of the assessment year 1973-74 reads as follows: " Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in limiting the disallowance to Rs. 8,000 as against Rs. 20,000 disallowed by the Income-tax Officer ? " The facts relevant for the purpose of this question are : The managing director of the assessee had been paid during the year a sum of Rs. 80,000 as remuneration. The components of the above figure are Rs. 60,000 by way of salary, Rs. 15,000 as house rent allowance and Rs. 5,000 by way of payments relating to electricity, gas, etc. Holding that the entire amount represented salary, the ITO invoked the provisions of s. 40A(5)(c)(i) and held that payment of salary in excess of Rs. 5,000 per month was liable to be disallowed. The amount of disallowance thus arrived at was Rs. 20,000. The assessee did not succeed in his appeal complaining about such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad with clause (3) of section 17 subject to the following modifications, namely : (i) in the said clause (1), the word 'perquisites ' occurring in sub-clause (iv) and the whole of sub-clause (vii) shall be omitted ; ........ (emphasis supplied) The relevant portions of s. 17 defining " salary perquisite " and "profits in lieu of salary " are 17(1), 17(2) and 17(3). Section 17(1) and (3) are extracted below. The definition of " perquisite " in s. 17(2) is not of relevance in this case. "17. (1) 'Salary includes--- (i) wages; (ii) any annuity or pension; (iii) any gratuity; (iv) any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages; (v) any advance of salary; (vi) the annual accretion to the balance at the credit of an employee participating in a recognised provident fund, to the extent to which it is chargeable to tax under rule 6 of Part 'A' of the Fourth Schedule; and (vii) the aggregate of all sums that are comprised in the transferred balance as referred to in sub-rule (2) of rule 11 of Part A of the Fourth Schedule of an employee participating in a recognised provident fund, to the extent to which it is chargeable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee used by an employee either wholly or partly for his own purposes or benefit, then, subject to the provisions of clause (b), so much of such expenditure or allowance as is in excess of the limit specified in respect thereof in clause (c) shall not be allowed as a deduction ; ...... .." Proviso to s. 40A(5)(a), not being one which is relevant, is omitted. Section 40A(5)(c) is relevant, and is referred to in s. 40A(5)(a) itself. That provision, omitting the first proviso to sub-cl. (1), which is not relevant, reads as follows : " 40A. (5)(c) The limits referred to in clause (a) are the following, namely : (i) in respect of the expenditure referred to in sub-clause (i) of clause (a), in the case of an employee, an amount calculated at the rate of five thousand rupees for each month or part thereof comprised in the period of his employment in India during the previous year, and in the case of a former employee, being an individual who ceases or ceased to be the employee of the assessee during the previous year or any earlier previous year, sixty thousand rupees ; ...... (ii) in respect of the aggregate of the expenditure and the allowance referred to in sub-claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s concededly an employee thereunder. Salary, as regards this section, has a modified definition, whereunder perquisites are omitted in relation to s. 17(t)(iv). Thus, the payment of Rs. 80,000 would come within the inclusive definition of salary, particularly under cl. (iv) thereof, which, with the modification introduced under Expln. 2 to s. 40A(5)(c), would read: " 17(1)(iv) any fees, commission or profits in lieu of or in addition to any salary or wages." " Profits in lieu of salary " is defined under s. 17(3)(i) and takes in among others and includes any payment other than those detailed under the section specifically enumerated in cl. (ii) of s. 17(3), due to or received by the employee from the assessee (This is the effect of the change effected to the term " assessee ") and " an employer or formal employer ", as brought about by the second sub-clause in Expln. 2(a) to s. 40A(5)(c). If the amounts thus come within the ambit of s. 40A(5)(a)(i), the maximum that could be claimed is only Rs. 60,000. In that view of the matter, the entire Rs. 20,000 disallowed by the ITO and the AAC will have to stand. Counsel for the assessee, however, made an attempt to bring the amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of amenity " which is referred to in cl. (iii) in the definition of " perquisite referred to above. Scrutton L.J. in Ellis and the Ruislip-Northwould Urban District Council, In re [1920] 1 KB 343 at p. 370 (CA), observed about 'amenity' in the following words : " The word 'amenity is obviously used very loosely; it is, I think, novel in an Act of Parliament, and appears to mean 'pleasant circumstances or features, advantages '. Wide streets and plenty of air and room between houses seem clearly to be amenities ........" In India, the term " amenity " appears to have gathered a wider meaning particularly with the growth of industrial jurisprudence. The word is understood to take in advantages which have financial implications to those provided with such " amenities ". Awards of the industrial courts and labour appellate tribunals had occasion to consider many demands of the workers other than wages. Many such claims were grouped as " amenities " and dealt with as such. Whatever be the amplitude of that term as generally understood, it appears to us that the amounts paid by the assessee to its managing director as house rent allowance, and payments relating to electricity, gas, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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