TMI Blog1984 (1) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction with reference to the provisions of s. 37(1) free of the restriction contained in s. 37(3). A similar issue came up for decision before 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 others sources. The previous year ended on 31st Dec., 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. vs. ITO (1983) 3 SOT 384 (SB). Following with respect this order of the Special Bench, we reject the assessee's objection in the regard. 3. The next objection is as under: "The Commissioner of IT (A) erred in sustaining the disallowance of Rs. 9,160 as part of travelling allowance un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er day as regards state 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 (General Manager) Rs. 5,761 Rs. 1,561 Total period 28 on Days. Daily Allowance drawn the same basis as above. (He visited only Bombay and Delhi) S.Raghavan Secretary and Chief Accountant Rs. 549 Rs. 249 Total period 2 as days. Daily Allowance drawn above. (Visited only Bombay) 6. Counsel emphasised that the expenditure disallowed was not because it has not admissible as business expenditure. It was considered a legitimate business expenditure and would have been allowed under s. 37(1) but for the alleged embargo enacted in s. 37(3). Counsel contends there is in law no such restriction in s. 37(3) as has been applied here by the authorities below and, according to him, the restriction has been applied only because the authorities missed the true import of the section. Counsel read with s. 37(3) and r. 6D. Sec. 37(3) is reproduced below: "(3) Notwithstanding anything contained in sub-section (1), and expenditure incurred by an assessee after the 31st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at the rate applicable in the case of the highest paid employee of the assessee: 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". Counsel referred to the meaning of the word "travel" found in the dictionary. In the Concise Oxford Dictionary (5th Encumbrances.), p. 1382. The following is given: "Travel. (1) Make a journey esp. One of some length to distant countries; pass esp. in deliberate on systematic manner from point to point; move, proceed, in specified manner or at specified rate." The submission is that travelling denotes movement of an individual from Point A to Point B. Expenditure in connection with travel would, therefore, mean all the expenditure that is incurred in the process of an individual's progress from Point A, say Madras, to Point B, say Delhi. Once the indiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 tax-payer is possible, the construction favourable to the taxpayer must be preferred. Attention is drawn to the decision of the Supreme Court in CIT vs. Naga Hills Tea Co. Ltd. 1973 CTR (SC) 329: (1973) 89 ITR 236 (SC), where it was held that if a provision of a taxing statute can be reasonably interpreted in two ways that interpretation which is favourable to the assessee has to be accepted. Thus according to the ld. Counsel the expenses incurred by the four persons above, after they reached their places of destination including the stay expenses there, could not be considered for disallowance in terms of the section and the rule. Sec. 37(3) as well as the rule, no doubt, specify disallowance of hotel expenses incurred in connection with such travelling. Firstly the phrase "including hotel expenses or allowances paid" quali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elf. 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 employer is conducted outside the headquarters as aforesaid. In this connection, we would also briefly refer to the aspect that a distinction between travelling allowance and daily allowance is maintained in respect of civil servants, who move out from headquarters on tour, even though under the TA and DA Rules, daily allowance is also permissible in respect of the time spent on journeys as well, whether such time is spent actually in transport/vehicle itself or off days when no official business as such is conducted. The said aspect is being mentioned only from the limited view point that travelling allowance and daily allowance are not identical. According to us, the daily allowance admissible to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... himself or herself arrived at the point to having left the arrival platform." (Murphy vs. Verati (1967) 1 All E.R. 861, per Wind, L.J.)." 10. Shri Vaish further pointed out from the above publication (ibid) that an Australian Court had occasion to interpret s. 9A of the Common wealth Employee s Compensation Act, 1930-1962. This section provided that where personal injury by accident is caused to an employee while he is "travelling" to or from his employment by the Commonwealth, the Commonwealth shall be liable to pay compensation as if the accident were an accident arising out of or in the course of his employment. Reliance was placed on this to argue that "travelling" simply meant from proceeding on the business of employer from one place, i.e., headquarters to the place at which the employee so travelling has to conduct the business of the employer. 11. Similarly, counsel referred to the same publication to illustrate the meaning of the phrase in connection with occurring in conjunction with the word "travelling" both in s. 37(3) as well as r. 6D. The extract relied upon for this purpose is with regard to the interpretation of s. 10 of the Government Railway Act, 1908 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 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 he started his "travelling" till the moment he finished it back at his headquarters. It would indeed be incongruous, according to the departmental representative, to cut off the exercise of travelling the moment the employee or other person reached the place of destination; and then revive it from the moment he started his journey back to the headquarters. The Act does not warrant and such sophistry. The words used are plain and there is no room for giving the phrase "in connection with travelling" a wholly new meaning that is not in accordance with the common or accepted usage or understanding of the phrase. 13. On the question of interpretation, Shri Padmanabhan cited several authorities. The sum and substance of his submission in this regard are: (i) A construction which defeats the very object sought to be achieved by the legislature must, if possible, be avoided (CIT vs. S. Teja Singh (1959) 35 ITR 408 (SC). (ii) It is true that a taxing provisions must receive a strict construction at the hands of the Courts and if there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court itself in K.P. Varghese vs. ITO Anr. (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597, 608-609 (SC). (That case involved the interpretation of s. 52(2) of the Act) He referred to paragraph 10 of the Commissioner (A)'s order which has extracted the Finance Minister's Budget speech (1964-65), introducing the Finance Bill, 1964 (1964) 51 ITR (St.) 89). Paragraph 57 of the speech was as follows: "57. I find that the provisions of the Income-tax Act allowing as deductible expenditure amount spent wholly and exclusively for the purpose of business are being abused in respect of certain types of expenditure. Unduly large amount are spent on daily allowance, on unnecessary bookings on planes and trains, on advertisement and on the maintenance of guest houses and suites of rooms in hotels out side the specific places of business, on providing conveyances and in paying high rents for accommodation for their officers and directors and in many other ways. I am afraid this tendency amongst companies is responsible in no small measure for the present high costs and the time has come to put a check at least on some of these expenses. It is not practicable to spell out all the restric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he deduction provisions under the Act by claiming unduly large expenditure on daily allowance, on the maintenance of guest houses and suites of rooms, hotels outside the specific place of business, on providing conveyances and in paying high rents for accommodation for their Officers and Directors and in many other ways. From that point of view, it could be safely said that the expenditure that has been incurred by the assessee here could not have been the object of attack by legislative amendment. But then, in the interpretation of a taxing statute equitable considerations alone do not loom large. The doctrines of beneficial construction and equitable construction have now become obsolete. Courts will decline to interfere for the assistance of person who seeks its aid to relieve them against express statutory provisions simply on equitable grounds as modern Acts are framed in the light of equitable as well as legal principles. Modern methods of judicial approach to interpretation of statues are by and large concerned with the literal rule or (in cases of ambiguity) the mischief rule or (where the grammatical) and ordinary sense of the words in the statute leads to some obscurity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a tax. There is no resumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." This rule has, however, of tern given rise to some unease. Is it enough to say that one has to look at what is clearly said, when nothing appears to be clearly said? Can one say in such a case that there is no room for any intendment? Rowlatt, J's observations perhaps oversimplify the problem which courts often face. It has been contended for both the parties before us that the section as well as the rule were in plain terms and that there was no ambiguity. But then what they understood from the section and the rule was not the same. Here we may consider the decision of the Delhi Bench of the Tribunal supra, to understand what meaning it gave to the relevant provisions. We have looked at the reasoning therein with respect and care. We are, however, unable to accept the interpretation recorded therein because of a major difficulty. The meaning of the phrase "in connection with travelling" we find, has not been examined exhaustively and the different shades of the dispute before us were not presented before the Bench in that case for adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts existed to bring about a statute, the inferences drawn therefrom are exceedingly slight." (R.V. West Riding County Council (1960) 2 KB 676, 16). But the above position is not inflexible. The Supreme Court in K.P. Varghese vs. ITO Anr. (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597, pp. 608-609 (SC). Observed: "Now, it is true that the speeches made by the Members of the legislature on the floor of the house when a Bill for enacting a statutory provision is being debated are inadmissible for the purposes of interpreting the statutory provision but the speech made by the mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation was enacted. This is in accord with the recent trend in juristic thought not only in Western countries but also in India that interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible. In fact there are at least three decisions of this Court, one in Loka Shikshana Trust vs. CIT 1975 CTR (SC) 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave already pointed out as regards interpretation of foreign Acts, we would extract below a relevant portion from the comment in Stroud's Judicial Dictionary: "(3) "Travelling Expenses", in the ordinary acceptance, "include the whole cost and inconvenience to which a person is put by being absent from home" (per Lord M' Laren Ivory vs. Macrae, 33 Sc. L.R. 105) held in that case, that "travelling expenses of presiding officers and clerks, per mile, is" Sched, Pt. I, Returning Officers (Scotland) Act, 1891 (54 55 Vict. C 49), include, and those officials are entitled to their cost of subsistence in an hotel or lodging as well as their railway fare or other expenses of locomotion, so long as the limit of 1 s. Provision mile is not exceeded. See now Returning Officers, Expenses (Scotland) Regulations, of 1949, S.I. No. 1966). Table B. Art. 8". 22. What is of interest here is to note that the phrase "travelling expenses" has been explained in its ordinary acceptance. The phrase includes the whole cost and inconvenience to which a person is put by being absent from home. The basic concept is not movement but the whole cost and inconvenience of the person absent from home. Looked at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claims such as the assessee has made here; and, therefore, it must be held that the putative intention of the legislature has failed to be enacted into adequate statutory language. 24. It is true that it was not in serious dispute before us it could not have been that the expenditure claimed by the assessee can be termed most reasonable looking to the places of destination and the number of days spent thereby the employees and the directors. But from this alone we are unable to accept the claim that the legislative amendment has misfired. In fact, an exactly opposite situation seems to have been brought about. Not infrequently, when Government finds its fundamental fiscal policy being impaired by avoidance (or evasion) with the consequent immunity conferred on social imbalances and tensions, the taxing statute is amended. But often the amendment is in terms of such severity (out of abundant caution) that it catches even the innocent or the reasonable taxpayer. In other word, in seeking to block a loophole, the legislature often enacts the anti-avoidance provision in such wide language that a tax trap results which catches unintentionally even persons other than those meant to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... example, engage taxis to meet the concerned persons, report back to the officer the developments and to take instructions, and if these expenses, to cite only one instance are held to be subject to limitation provided in r. 6D, then it will cripple business, far from achieving the object which the Hon'ble Finance Minister had in his mind, when the curb on such expenditure was proposed, it would seriously impede the attainment of objectives and progress of business. Those expenses are incurred purely for the purpose of business and fall outside the scope of not only r. 6D but even the Finance Minister's speech made in the Parliament. The whole object of introducing a restriction on the allowance of travelling expenditure was to curb lavish expenditure being incurred on ravelling so as to present it from resulting in high cost. An expenditure of the type mentioned above could neither be said to be lavish nor unnecessary or resulted in high cost. That should, therefore, be excluded. 2. We feel that this is a very relevant bona fide and justifiable contention which needs to be accepted. We are of the view that having regard to the circumstances obtaining before the introduction of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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