TMI Blog1984 (1) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... diture claimed after taking into account the actual period spent by the employee outside his headquarters in conducting the business of the assessee. The Delhi Bench further directed that such expenditure would have to be considered for deduction with reference to the provisions of section 37(1) free of the restriction contained in section 37(3). A similar issue came up for decision before the Madras Bench 'C' of the Tribunal in the case of the assessee here. The Madras Bench found it difficult to agree with the reasoning and conclusion of the Delhi Bench noted supra and suggested that the appeal of the assessee here be heard by a Special Bench. This is how the matter has come up before us. 2. The assessee is a public limited company. It carries on business in hire-purchase, finance and has also income from other sources. The previous year ended on 31-12-1979. The first objection relates to the rejection by the authorities below of the assessee's claim for deduction of surtax liability of Rs. 39,197 from its profits this year. We find that a Special Bench of the Tribunal held that such a deduction was not allowable, in Amar Dye-Chem. Ltd. v. ITO [1983] 3 SOT 384 (Bom.). Following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------------------------------------------------------------------------ Name of the person Total expenses Excess Remarks incurred disallowed --------------------------------------------------------------------------------------------------------------------------------------------------- Rs. Rs. T. S. Santhanam 1,800 900 Total period 6 days. (Chairman) Daily allowance at Rs. 150 per day as travel was to Bombay. T. N. Padmanabhan Total period 54 days. (Managing Director) Drew daily allowance 13,100 6,450 of Rs. 150 per day as regards stay at New Delhi and Bombay. For the other places visited, e. g., Bangalore, Hyderabad, Madurai, etc., daily allowance drawn was Rs. 100 per day. G. K. Raman Total period 28 days. (General Manager) 5,761 1,561 Daily allowance drawn on the same basis as above. (He visited only Bombay and Delhi.) S. Raghavan Total period 2 days. (Secretary and Chief Daily allowance drawn Accountant) 549 249 as above. (Visited only Bombay.) --------------------------------------------------------------------------------------------------------------------------------------------------- 6. The counsel empha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee : Provided that if the stay of such employee or other person outside his headquarters is at Bombay, Calcutta or Delhi, the amount computed at the aforesaid rates shall be increased by a sum equal to thirty-three and one-third per cent of such amount : Provided further that in a case where such employee or other person on any day of his stay outside his headquarters, stays free of charge in a guest house maintained by the assessee, the amount under this clause shall be calculated at one-third of the aforesaid rates and where the employee or such other person is provided lodging only free of charge, at one-half of the aforesaid rates." 7. According to Shri Ananthachari, the expression 'expenditure incurred by an assessee in connection with travelling' does not mean what it has been taken to mean by the authorities below. According to him, the crucial word which governs the meaning of the entire provisions including the rule is 'travelling'. The word occurs in the relevant section as well as the rule by way of the phrase 'in connection with travelling'. The counsel referred to the meaning of the word 'travel' found in the dictionary. In the Concise Oxford Dictionary, 5th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rive any benefit that may be intended to be conferred under the said circular ; that in such a background the word 'migrated' used in the circular must be understood as meaning physical movement from Ceylon to India accompanied by some sort of intention ; so long as the movement from Ceylon to India was voluntary and not for a short or limited period or for any specific purpose, the assessee could be said to have migrated from Ceylon to India. 8. The counsel stresses the above decision to contend before us that travel also connotes (as in the term 'migrated') merely movement from point to point and nothing more. After all (it is contended) a taxing statute has to be construed strictly. There is no intendment and nothing is implied in a taxing statute. If the words of the statute fail to reach the subject, so must the tax. The further submission is : even assuming a different interpretation---adverse to the taxpayer---is possible, the construction favourable to the taxpayer must be preferred. Attention is drawn to the decision of the Supreme Court in CIT v. Naga Hills Tea Co. Ltd. [1973] 89 ITR 236, where it was held that if a provision of a taxing statute can be reasonably interp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, outside the headquarters on travel or in connection with travelling is not to be taken to be identical with the entire period on which such employee or other person remains on tour. However, we do not accept as correct the assessee's submission that the provisions of section 37(3) or of the connected rule are applicable so far as non-fare or journey expenses are concerned only for the periods spent up to the point of time of reaching the appointed destination or destinations on the one hand and for the time spent from the time of leaving such destination (outside the headquarters) to the point of reaching either the next destination outside the headquarters or reaching the headquarters itself. In our view, only the days on which such employee or other person conducts the business of the employer outside his headquarters would fall outside the ambit of section 37(3). In other words, the expenditure incurred in connection with travelling of employee, etc., would, so far as non-journey expenses are concerned cover only the time spent in hotel/guest houses, rest houses, etc., i. e., the period prior to commencement of and subsequent to the days on which actual business of the employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does. A tour indicates a journey through a country from place to place. It indicates a spell of duty on service or time to be spent at a station. On the other hand, travel is a much more rigid concept. It has only to do with the movement of a person from one place to another and nothing more. He referred to the judicial interpretation of the word 'travel' as given in the following extract from Butterworth's Words and Phrases Legally Defined, volume 5, p. 217, 2nd edition : "So long as the person is in the process of arriving, . . . having come by a railway conveyance, at the exit or terminus from the arrival platform, he is in my judgment still travelling ; and applying that to the facts of the present case, it must be equally clear as a matter of logic that a companion, on whose behalf he tenders a sum of money, is still in the process of travelling when that companion, has not himself or herself arrived at the point of having left the arrival platform."---Murphy v. Verati [1967] 1 All ER 861, per Winn, L. J. at p. 863. 10. Shri Vaish further pointed out from the above publication, ibid., that an Australian Court had occasion to interpret section 9A of the Commonwealth Employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, on the order of the Delhi Bench of the Tribunal in Bharat Commerce Industries' case and contended that the authorities below have not interpreted the section and the rule correctly. 12. Shri C. S. Padmanabhan, appearing for the revenue, supported the orders of the authorities below. He also referred to the dictionary meaning of the word 'travel' in the first instance, i. e., 'make a journey esp. one of some length to distant countries', etc. The departmental representative submits that the making of a journey is a complete and integrated whole. It is indivisible. It not only comprises movement from the headquarters to the place of destination but also the stay at the place of destination as well as the return from that place to the headquarters. There is no warrant for overrefining the concept of 'travel' (or the plain meaning of the statute) into what is, plainly, not in consonance with the common understanding of the word. According to the departmental representative, the section as well as the rule have made it doubly clear by the use of the phrase 'in connection with'. This phrase brought into the ambit of the Act, the expenditure incurred by an employee from the moment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be applied is the literal rule but that the agreement stops there. According to the departmental representative, on a literal construction, the revenue must succeed. On the other hand, both the counsels appearing on the other side also have contended with equal vehemence that on a literal construction the orders of the authorities below cannot stand. The departmental representative adds that there is also the order of the Delhi Bench of the Tribunal which has recorded a view that the Commissioner (Appeals) found himself unable to follow. From all this, whatever is certain or not certain, it could be argued (according to the departmental representative) that there is some ambiguity in the provision. Assuming then this ambiguity, the departmental representative submits that a necessary step to understand the true meaning of the provision would be to invoke some external aid to the construction of the phrase in question. He points out that this is permissible and has been held to be so by the Supreme Court itself in K. P. Varghese v. ITO [1981] 131 ITR 597, 608, 609 (SC). [That case involved the interpretation of section 52(2) of the Act.] He referred to paragraph 10 of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aning sought to be placed on them for the revenue. The further submission was : it is one thing for the Court to discard a literal interpretation and apply the mischief rule where it finds it necessary to do so : but it is quite a different thing if the Court (in doing so) has to rewrite the statutory language. To do so would be not to interpret the statute but to indulge in judicial paraphrasing ; and this is not permissible. 16. So much for the submissions before us. We have already extracted briefly, supra, the details of the quantum of the expenditure involved including the number of days of stay outside the headquarters and the places visited. It is at once obvious that the expenditure claimed in relation to the places visited and the number of days of stay thereat, is most reasonable. It is also clear that the section and the rule have been put on the statute book to catch those taxpayers who (to quote the Finance Minister from his Budget speech 1964-65, supra) abuse the deduction provisions under the Act by claiming unduly large expenditure on daily allowance, on unnecessary bookings on planes and trains, on the maintenance of guest houses and suites of rooms, hotels outsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt, therefore, relies primarily on the letter of the law in the process of interpretation. It is to be noted here that rules or canons of construction are different in scope from rules of law. A rule of construction is not inflexible. It is merely a presumption in favour of a particular meaning in case of ambiguity. As Bowen, L. J., puts it : "These canons do not override the language of a statute where the language is clear ; they are only guides to enable us to understand what is inferential. In each case, the Act of Parliament is all powerful, and when its meaning is unequivocally expressed, the necessity for rules of construction disappears and reaches the vanishing point."---London Northwest Railway v. Evans [1893] 1 Ch. 186, 27. 18. It is well settled that a taxing statute has to be construed literally. The locus classicus of Rowlatt J. is perhaps the most quoted in this context. In Cape Brandy Syndicate v. IRC [1921] 1 KB 64, 71 be said : "In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1890] 15 AC 334, 353 : "The two Acts differ widely in their scope and even when they happen to deal with the same subject their wording is not the same. It was argued, indeed, that the language was 'practically identical', but that expression to my mind, involves an admission that the language is different." Hence, we can only proceed with caution in the matter of following decisions of foreign Courts given in interpreting statutes quite different in their scope. 19. In the light of the arguments placed before us, we do find that there is an ambiguity in the language of the section and the rule. The phrase 'in connection with travelling' has to be given the meaning which the Legislature intended that it should have, while ensuring no violence is done to the statutory language in the process. No doubt, it has been held that the words of a statute themselves do best declare the intention of the law given. Farwell, L. J., stated the position in this regard thus : "The mischief sought to be cured by an Act of Parliament must be sought within the Act itself. Although it may perhaps be legitimate to call history in aid to show what facts existed to bring about a statute, the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be noticed from the extracts of the section and the rule in paragraph 6 above, the words 'including hotel expenses or allowances paid in connection with such travelling' appear in brackets. No doubt, the counsel for the assessee contended, hotel expenses here meant only such expenses incurred, while in transit, i. e., midway in the movement from Point A to Point B and not the hotel expenses incurred after reaching Point B, i. e., the place of destination. We do not think this to be the correct reading of the language of the statute. We have already extracted the dictionary meanings of the word 'travel'. Hotel expenses incurred at the place of destination also, in our view, would be expenses incurred in connection with 'travelling' within the meaning of section 37(3) and rule 6D. (We may mention here that in the instant case the disputed disallowance concerns only boarding and lodging expenses, i. e., 'hotel expenses', and not expenses on telephone calls, taxi fare and the like at the places of destination.) Subject to the limitations we have already pointed out as regards interpretation of foreign Acts, we would extract below a relevant portion from the comment in Stroud's Judicia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals)'s reading of the section as well as the rule as correct. 23. We must note here the stand taken by the counsel for the assessee as well as the counsel who appeared as intervener on the applicability of the mischief rule. They argued that firstly, on a literal reading the assessee must succeed ; that alternatively, even assuming ambiguity in the statute calling for application of the mischief rule, the Legislature had failed to translate its intent effectively and that the words of the section as well as the rule having failed to reach the subject, the tax sought to be levied on the basis of such section and rule must also fail. In support of this argument, the actual expenditure incurred by the employees and the other persons of the assessee-company on travelling and claimed as deduction is referred to. The expenditure is reasonable and the section and the rule have been introduced only to catch taxpayers trying to get away with huge claims of expenditure on travelling including boarding and lodging in connection therewith. The section and the rule could not have been meant for claims such as the assessee has made here ; and, therefore, it must be held that the putative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to relying on external aids like the Finance Minister's speech, etc., in Parliament, we would like to arrive at the answer to the problem set before us by dealing with that portion of the argument addressed to us in the course of the hearing as to whether the expression 'including hotel expenses' is to be limited only to the daily allowances as stipulated in rule 6D or should it cover expenses incurred after stay in the hotel other than the daily allowances, like telephone bills, secretarial assistance, etc., etc. The argument of Shri Vaish before us proceeded on the lines that if the expression 'hotel expenses' is to include all and every expense incurred, for subjecting to the limitation provided in rule 6D, it would do grave injustice and result in grave unintended hardships. It is quite possible for an executive of a business house or a director to go to another place, stay in a hotel for the purpose of transacting business. A person going, say from Madras to Delhi, will have to stay in a hotel not for the mere purpose of staying in hotel but to transact business on behalf of the company and in that process, he may have to, say for example, engage taxis to meet the concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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