1980 (1) TMI 82

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..... e employees cannot be considered for the purpose of disallowance under section 40(a)(v) of the I.T. Act, 1961 ? " The assessee is a limited company running a tea estate. To six of its employees, the assessee provided rent-free accommodation. The buildings thus provided are owned by the assessee. The assessee also incurred certain expenses on the maintenance and upkeep of those buildings. These have been exhibited in the form of a chart in the statement of the case as follows : --------------------------------------------------------------------------------------------------------------------------------------------------- " Name Education Value of rent- Upkeep of Total allowance free accommo- buildings dation consi- dered .....

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..... sion also. It was of the opinion that the expression " employee " is qualified by the word " such ". It would, therefore, refer to the type of employees which appear in the earlier part of the section. That earlier part of the section has made it clear that the employee must have had some benefit or amenity arising out of the expenditure. Unless there was such benefit arising directly out of the expenditure, the Tribunal took the view that s. 40(a)(v) cannot be applied. The maintenance expenses in respect of the buildings does not give the employee any benefit or amenity. Whether the building is occupied or not, the company, as the owner, has to incur expenses on maintenance and repairs. There was no special amenity or benefit enjoyed by th .....

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..... employment during the previous year, whichever is less : ........" As the Tribunal pointed out, the significant part of the provision is the expression " such " which qualifies the word " employee ". In the context, and according to the rules of grammar, this can only refer to the employee who has been described earlier. We should, therefore, turn to the earlier description of the employee. That we get in the earlier part of the section as an employee who enjoys the benefit of an expenditure which results directly or indirectly in the provision of any benefit or amenity or perquisite whether convertible into money or not. The question then is : whether the expenses on the upkeep of buildings would satisfy the provision in s. 40(a)(v) of .....

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