TMI Blog1979 (8) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... 68 and 1970-71 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in its opinion that the benefits in the shape of rent-free quarters and the bonus paid to employees could not be taken into account for the purpose of working out disallowance under section 40(a)(v) of the Income-tax Act, 1961 ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the levy of interest under section 217(1A) was not appealable and, therefore, the directions given by the Appellate Assistant Commissioner to the income-tax Officer to allow certain reliefs as per his order were not proper and could not be acted upon ? " The facts relevant for answering the questions re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 70-71, the assessee claimed relief under s. 80J before the ITO, but that was rejected on the ground that the manufacturing of lamp-caps was part and parcel of the assessee's existing business of manufacturing lamps and s. 80J was inapplicable. An appeal was filed before the AAC for the assessment year 1970-71, who held that the new unit was nothing but a part and parcel of the assessee's existing business, and, as such, no relief could be granted under s. 80J. The assessee appealed against this order to the Appellate Tribunal while the department filed an appeal against the appellate order for the assessment year 1967-68. The Tribunal found that the assessee had established a new undertaking and was entitled to relief under s. 80J. So far a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AAC while disposing of the appeal relating to the levy of interest was not proper as the directions could have been issued only in case the order was appealable. Turning now to the remaining questions in seriatim. It has been seen that the Tribunal has found that the assessee had obtained a new licence for manufacturing caps not only for meeting its own needs but for sale to other customers. Fresh capital had been employed by the assessee in setting up this unit. It was as such held by the Tribunal that it was not a mere extension or expansion of old business. The view of the Tribunal appears to be justified in view of the pronouncement of the Supreme Court in the case of Textile Machinery Corporation Ltd. v. CIT [1977] 107 ITR 195. Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by such employee either wholly or partly for his own purposes or benefit, to the extent such expenditure or allowance exceeds one-fifth of the amount of salary payable to the employee, or an amount calculated at the rate of one thousand rupees for each month or part thereof comprised in the period of his employment during the previous year, whichever is less : Provided that in computing the aforesaid expenditure or allowance, the following shall not be taken into account, namely :-- (a) any payment by way of gratuity ; (b) the value of any travel concession or assistance referred to in clause (5) of section 10 ; (c) passage moneys or the value of any free or concessional passage referred to in sub-clause (i) of clause (6) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... So far as rent-free quarters are concerned, although the company was not charging any rent from its officers the ITO had worked out the rent of these quarters on the basis of cost of constructing these quarters, and treated this as a part of the salary of the employees. The AAC found that the company had made no cash reimbursement or granted any subsidy in respect of rent, and no amounts were charged in respect of these quarters. There was, as such, no notional income to the company. He, however, remanded this issue to the ITO for calculating the depreciation on the quarters, and the repair expenses of the quarters as charged in the accounts of the company, and to treat them as a part of the perquisite of the employees for purposes of com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontributions by the assessee or interest on such contributions." It will be seen that the words " profits in lieu of salary " have been given a very wide meaning by s. 17(3)(ii). It includes any payment received by an employee from his employer. Profit bonus is a payment made by an employer to its employees where a company earns profit in a particular year. But whatever be the reasons or motive for making the payment it comes within the ambit of s. 17(3)(ii), for it is an amount paid by the employer to its employees. Now, such a payment is expressly excluded by cl. (g) of the proviso, for computing the expenditure for purposes of s. 40(a)(v). Once profit bonus is excluded for computing the expenditure for purposes of s. 40(a)(v), the que ..... X X X X Extracts X X X X X X X X Extracts X X X X
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