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TMI Blog1978 (7) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... of the amounts claimed. Being aggrieved by the additions the assessee preferred appeals therefrom. The AAC accepted the contentions of the assessee and held that on a proper construction of s. 40(c)(iii) the allowance in question paid directly to the employees in cash did not come within the ambit of the expressions " benefit or amenity or perquisite " as appearing in the said section. The appeals of the assessee were allowed and the additions were deleted. The revenue went up on further appeal to the Income-tax Appellate Tribunal. The Tribunal also accepted the contention of the assessee, upheld the orders of the AAC and dismissed the appeals of the revenue. On an application of the CIT, West Bengal-II, Calcutta, under s. 256(1) of the I.T. Act, 1961, the Tribunal has drawnup a statement of case and has referred the following questions to this court for its opinion as questions of law arising out of its order : Assessment year 1966-67: " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that 'overseas allowance ' and 'managing allowance' did not fall within the expressions ' benefit ', ' amenity ' or ' perquisite ' within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure incurred after the 29th day of February, 1964, which results directly or indirectly in the provision of any benefit or amenity or perquisite, whether convertible into money or not, to an employee (including any sum paid by the company in respect of any obligation which but for such payment would have been payable by such employee), to the extent such expenditure exceeds one-fifth of the amount of salary payable to the employee for any period of his employment after the aforesaid date: Provided that in computing the aforesaid expenditure any payment by way of gratuity or the value of any travel concession or assistance referred to in clause (5) of section 10 or passage moneys or the value of any free or concessional passage referred to in sub-clause (i) or any payment of tax referred to in sub-clause (vii) of clause (6) of that section or any sum referred to in clause (vii) of sub-section (1) of section 17 or in clause (v) of sub-section (2) of that section or the amount of any compensation referred to in clause (i) or any payment referred to in clause (ii) of sub-section (3) of that section or any payment referred to in clause (iv) or clause (v) or any expenditure r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether convertible into money or not " in the section related only to " perquisites " and did not relate to the items "benefit" or" amenity". He submitted that the meaning of the section would be quite clear if the governing phrase of the section, i.e., " any expenditure incurred ...... which results directly or indirectly in the provision of any benefit, amenity or perquisite ........" was kept in view. The section had to be looked at primarily in the context of expenditure incurred by a company. Mr. Sen also contended that in legal parlance the word " benefit " commonly included cash benefits as also benefits in kind. He cited examples of money paid to an employee for the appointment of a gardener or as entertainment expenses or for the expenses of a motor car which would certainly fall within the definition of a benefit though they reached the hands of the employees concerned in the form of cash. Mr. Sen submitted that the courts in India have always construed benefits to include benefits in cash as well as in kind. He cited a decision of the Madras High Court in Board of Directors of the South Arcot Electricity Distribution Co. Ltd. v. K. Mohamed Khan [1963] 23 FJR 128 ; AIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the expression " benefit " or " amenity " or " perquisite " was also untenable. The said proviso referred to benefits which were not included in the computation of the total income of an employee and came under a special category. Dr. Pal next contended that the decision of the Madras High Court in South Arcot Elecricity Distribution Co. Ltd. v. K. Mohamed Khan [1963] 23 FJR 128; AIR 1963 Mad 192, did not advance the case of the revenue at all as the High Court in that case was concerned with the construction of s. 33C(2) of the Industrial Disputes Act, 1947. The section provided, inter alia, that where a workman was entitled to receive any benefit, which was capable of being computed in terms of money, the same should be computed under the relevant rules framed under the statute by the prescribed court and may be recovered by the Government under the statute. In construing the said section, it was held that the expression " benefit " would include all benefits, including benefit by way of cash payments. Dr. Pal submitted that, in the instant case, the statute concerned was materially different and the expression " benefit " had to be construed in contradistinction to the expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or benefit for which payment is required, obligation to pay has been incurred by the employee and the company makes the payment to meet the obligation, it is only in such a case the payments would come within the mischief of the section. Expenditure incurred by the company in making such payments would indirectly result in the provision of a benefit to the employee convertible in terms of money. As suggested on behalf of the revenue money paid for a gardener or money paid for entertainment expenses of the employee are not cash benefits but payments made for obligations incurred by the employee and are benefits in kind convertible into cash. The proviso to the said sub-section refers, inter alia, to payments by way of gratuity, for the value of travel concession or free or concessional passage, for provident fund or expenditure for family planning. It is to be noted that gratuity is generally paid to an employee after or at the point his employment comes to an end, and the employee is no longer paid any salary. Expenditure for family planning and provident fund are also usually not paid to the employed direct in cash but such expenditure results in a benefit to the employee. Payme ..... 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