9911796707
TMI Blog2013 (1) TMI 511X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax Appellate Tribunal, Hyderabad is correct in holding that the daily allowance paid to the employees would partake the character of hotel expenses for the purpose of disallowance under Section 37(3- A) to (3D)?". The assessee M/s. Novopan India Limited, Hyderabad is engaged in the manufacture and sale of plain and laminated particle boards etc. For the assessment year 1985-86, it filed return declaring "nil" income on 30.9.1985. The assessing officer, while completing the assessment under Section 143(3) of the Act, disallowed an amount of Rs.1,08,915/- representing daily allowance paid to the employees of the assessee under Section 37(3A) to (3D) on the ground that the "daily allowance" paid to the employees has to be treated simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s set out above arose out of its order and therefore made the reference. The said reference has been numbered as RC No.58 of 1997. Heard Sri Shravan Kumar, learned counsel representing Sri C. Kodanda Ram, learned Senior Counsel appearing for the petitioner and Sri S.R. Ashok, learned Senior Standing Counsel for the Revenue. Sri Shravan Kumar, counsel for the petitioner contended that daily allowances paid by the assessee to its employees is distinct in character from hotel expenses and such daily allowances also should be disallowed in terms of section 37(3A) to (3D) of the Act; that such expenditure incurred by the assessee is an expenditure incurred in respect of "business carried on by the assessee" and therefore is liable to be disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofits and gains of business or profession". (2) .... "(3A) Notwithstanding anything contained in sub-section(1), where the expenditure or, as the case may be, the aggregate expenditure incurred by an assessee on any one or more of the items specified in sub-section (3B) exceeds one hundred thousand rupees, twenty per cent of such excess shall not be allowed as deduction in computing the income chargeable under the head "Profits and gains of business or profession". (3B) The expenditure referred to in sub-section (3A) is that incurred on - (i) advertisement, publicity and sales promotion; or (ii) running and maintenance of aircraft and motor cars; or (iii) payments made to hotels Explanation - For the purpose of sub-sections (3A) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made - (i) in the case of an assessee engaged in the business of operation of aircraft, in respect of expenditure incurred on running and maintenance of such aircraft; (ii) in the case of an assessee engaged in the business of running motor cars on hire, in respect of expenditure incurred in running and maintenance of such motor cars." A reading of the above provision indicates that where the expenditure or as the case may be, the aggregate expenditure incurred by an assessee on any one or more of the following, i.e. (i) advertisement, publicity, sales promotion (ii) running and maintenance of air craft and motor cars and (iii) payments made to hotels exceeds Rs.1,00,000/-, 20% of such excess shall not be allowed as deduction i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt computed at the aforesaid rate shall be increased by a sum equal to fifty percent 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." Thus Rule 6-D (2) (b) of the rules clearly treats "hotel expenses" and "allowances paid to the employees" similarly and does not treat them distinctly. Therefore, the contention of the assessee that daily allowances paid to the employees under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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