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TMI Blog2005 (10) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... s or profession. Sections 30 to 36 relate to certain deductions which are allowed inter alia, on account of rent, rates, taxes, repairs and insurance in respect of premises and buildings used for the purposes of business or profession and include (a) where the premises are occupied by the assessee- (i) as a tenant, the rent paid for such premises; and further if he has undertaken to bear the cost of repairs to the premises, the amount paid on account of such repairs; (ii) otherwise than as a tenant, the amount paid by him on account of current repairs to the premises; (b) any sums paid on account of rent, rates, local rates, municipal taxes; (c) the amount of any premium paid in respect of insurance against risk of damage or destruction of the premises. In the Explanation to section 30, it has been indicated that the amounts paid on account of the items indicated above shall not include any expenditure in the nature of capital expenditure. Sections 31 and 32 deal with the amounts which are allowable in respect of repairs and insurance of machinery, plant and furniture used for the purposes of the business or profession and in respect of depreciation of buildings, machinery, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the profits and gains of the business or profession(computed in the manner aforesaid) at the rate of 1/4 per cent.; (iii) on the balance of the profits and gains of the business or profession (computed in the manner aforesaid) at the rate of 1/8 per cent. So, however, that the allowance shall in no case exceed Rs. 50,000. Provided that where the previous year of any assessee falls partly before and partly after the 30th day of September, 1967, the allowance in respect of such expenditure incurred during the previous year shall not exceed- (a) in the case of a company- (i) in respect of such expenditure incurred before the 1st day of October, 1967, the sum which bears to the aggregate amount computed at the rate or rates specified in sub-section (2), the same proportion as the number of days comprised in the period commencing on the 1st day of such previous year and ending with the 30th day of September, 1967, bears to the total number of days in the previous year; (ii) in respect of such expenditure incurred after the 30th day of September, 1967, the sum which bears to the aggregate amount computed at the rate or rates specified in this sub-section, the same proportion as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odation including any accommodation in the nature of a guest house or in connection with travelling by an employee or any other person (including hotel expenses or allowances paid in connection with such travelling) shall be allowed only to the extent, and subject to such conditions, if any, as may be prescribed. (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 purposes of sub-sections (3A) and (3B),- (a) the expenditure specified in clause (i) to clause (iii) of subsection (3B) shall be aggregate amount of expenditure incurred by the assessee as reduced by so much of such expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (ii) shall, for the purpose of this sub-section, be reduced by the amount, if any, received from persons using the guest-house: Provided further that nothing in this sub-section shall apply in relation to any guest-house maintained as a holiday home if such guest-house- (a) is maintained by an assessee who has throughout the previous year employed not less than one hundred whole-time employees in a business or profession carried on by him; and (b) is intended for the exclusive use of such employees while on leave. Explanation- For the purposes of this sub-section,- (i) residential accommodation in the nature of a guest-house shall include accommodation hired or reserved by the assessee in a hotel for a period exceeding one hundred and eighty-two days during the previous year; and (ii) the expenditure incurred on the maintenance of a guest-house shall, in a case where the residential accommodation has been hired by the assessee, include also the rent paid in respect of such accommodation. (5) For the removal of doubts, it is hereby declared that any accommodation, by whatever name called, maintained, hired, reserved or otherwise arranged by the assessee for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e book with effect from 1st April, 1970, is specific and provides that notwithstanding anything contained in sub-section (1) and sub-section (3) no allowance shall be made in respect of any expenditure incurred by the assessee after 28th February, 1970, on the maintenance of any residential accommodation in the nature of a guest-house and no allowance shall be made in respect of depreciation of any building used as a guest-house or depreciation of any assets in the guest-house. However, a guest-house maintained as holiday home in the circumstances indicated have been excluded from the purview of sub-section (4) referred to hereinabove. Inasmuch as, doubts still remained regarding the nature of accommodation used as a guest house by the companies, sub-section (5) was included in section 37 by the Finance Act in 1983 with effect from 1st April 1979 and was subsequently omitted by the Finance Act, 1997 with effect from 1st April, 1998. At the relevant point of time, namely, the assessment year 1994-1995, all the aforesaid provisions of section 37 were available and, therefore, applicable to the case of the appellant-company. Dr. Debi Prasad Pal, learned senior counsel appearing on b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 37(3) of the Act, inasmuch as the same had been allowed under sections 30 and 31 of the Act. Dr. Pal also referred to another decision of the Bombay High Court in Century Spinning and Manufacturing Co. Ltd. v. CIT [1991] 189 ITR 660 where following its earlier decision in the case of Chase Bright Steel Ltd. (No. 1) [1989] 177 ITR 124 it was held that sub-section (4) of section 37 of the Act is a non obstante clause in relation to sub-section (1) and sub-section (3) of section 37 and if any expenditure or allowance was made allowable in other sections of the Act, the same could not be withdrawn or denied to the assessee because of the prohibitory provisions of sub-section (4) of section 37. A similar view appears to have been expressed by the Gujarat High Court in the case of CIT v. Ahmedabad Manufacturing and Calico Printing Co. Ltd. [1992] 197 ITR 538; wherein it was also held that expenses incurred of the nature described in sections 30 to 36 could not be disallowed under section 37(4) of the Act. Dr. Pal also referred to a Full Bench decision of the Kerala High Court in CIT v. Travancore Cements Ltd. [1999] 240 ITR 816, wherein a distinction was sought to be made betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 215. Mr. Dutta urged that it was the clear intention of the Legislature to exclude the benefit of deduction in respect of guest-houses which were being run and maintained by companies in a lavish manner. Mr. Dutta submitted that while premises and buildings had been referred to in general terms in sections 30, 31 and 32 of the Act, guest-houses had been separately categorized for the purposes of section 37 which would be quite evident from the manner in which expenses, including rent and maintenance, were sought to be withdrawn in respect of such guest-houses. Mr. Dutta submitted that the intention of the Legislature would be further clear from the insertion of sub-section (5) which brought within the scope and ambit of section 37(4) all accommodation by whatever name called in the nature of a guest-house. In support of his submissions, Mr. Dutta referred to the decision of the Rajasthan High Court in CIT v. Instrumentation Ltd. [2002] 258 ITR 513, where upon considering the views expressed by the Bombay High Court and the Gujarat High Court in the cases of Chase Bright Steel Ltd. (No. 1) [1989] 177 ITR 124 and Ahmedabad Manufacturing and Calico Printing Co. Ltd. [1992] 197 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourts are to interpret the same in its literal sense and not to give it a meaning which would cause violence to the provisions of the statute. If the Legislature had intended that deduction would be allowable in respect of all types of buildings/accommodations used for the purposes of business or profession, then it would not have felt the need to amend the provisions of section 37 so as to make a definite distinction with regard to buildings used as guest-houses as defined in subsection (5) of section 37 and the provisions of sections 31 and 32 would have been sufficient for the said purpose. The decisions cited by Dr. Pal contemplate situations where specific provision had been made in sections 30 to 36 of the Act and it was felt that what had been specifically provided therein could not be excluded under section 37. The clarification introduced by way of sub-section (5) to section 37 was also not considered in the said case. As mentioned in the decision of the Calcutta High Court in the case of Biswanath Tea Co. Ltd. [2003] 264 ITR 166, any other interpretation would negate the very purpose of sub-section (4) of section 37. It is another matter that at a subsequent point of ti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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