TMI Blog2004 (10) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... ce while on transit which has been incurred in India – Held that Tribunal was not justified in restricting the allowance of extra shift to the number of days during which the new machinery or plant had actually worked. It was allowable on the basis of the number of days during which the applicant had actually worked double or triple shift. - - - - - Dated:- 12-10-2004 - Judge(s) : R. K. AGRAWAL., K. N. OJHA. JUDGMENT The judgment of the court was delivered by R.K. Agrawal J.- In Income-tax Reference No. 111 of 1985 which relates to the assessment years 1975-76 and 1976-77, the Income-tax Appellate Tribunal, Allahabad, has referred the following questions of law under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as the "Act"), for the opinion of this court: "1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that depreciation on assets provided to employees of the assessee free of charge required to be included in computing the disallowance under section 40A(5) of the Income-tax Act, 1961? 2. Whether, on the facts and in the circumstances of the case, the assessee is enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no expenditure was actually incurred, could be treated as an expenditure or allowance for the purposes of disallowance under section 40A(5) of the Income-tax Act, 1961 for the assessment year 1977-78? 5. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the expenses on maintenance of accommodation owned by the assessee and provided free of rent to Shri M.S. Nathan could be considered for the purpose of is allowance under section 40A(5) of the Income-tax Act, 1961 for the assessment year 1977-78?" Briefly stated the facts giving rise to the present reference are as follows: The applicant is a public limited company which runs a textile mill at Kanpur. It is also engaged in exporting its goods. In respect of the assessment year 1975-76, the Inspecting Assistant Commissioner (Assessment) included the amount of depreciation in respect of furniture provided by the applicant to its managing director, Sri T.N. Sharma, while computing disallowance under section 40A(5) of the Act. In respect of the assessment years 1976-77, 1977-78 and 1978-79 also he included depreciation on furniture and car while computi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax Appellate Tribunal. The Tribunal has upheld the orders passed by the Assessing Officer on the question of cash incentive under the Export Promotion Scheme and weighted deduction. It had, however, reversed the order of the Commissioner of Income-tax (Appeals) in so far as inclusion of the amount of depreciation on rent-free accommodation and its maintenance while computing disallowance under section 40A(5) of the Act and extra-shift allowance on new machineries added during the year. Since both the references are at the instance of the same applicant and raise some questions of law which are common for the assessment years 1975-76 to 1978-79 they are being decided by a common judgment. We have heard Sri R.S. Agarwal, learned counsel for the applicant, and Sri A.N. Mahajan, learned standing counsel for the Revenue. So far as the question of inclusion of the amount of depreciation and value of rent-free accommodation and its maintenance towards perquisite while working out disallowance under section 40A(5) of the Act is concerned it may be mentioned here that the relevant provision, section 40A(5)(a) and (b) of the Act reads as follows: "(5)(a) Where the assessee- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urring in sub-clause (iv) and the whole of sub-clause (vii) shall be omitted: (2) in the said clause (3), the references to 'assessee' shall be construed as references to 'employee or former employee' and the references to 'his employer or former employer' and 'an employer or a former employer shall be construed as references to 'the assessee'; (b) 'perquisite' means- (i) rent-free accommodation provided to the employee by the assessee; (ii) any concession in the matter of rent respecting any accommodation provided to the employee by the assessee; (iii) any benefit or amenity granted or provided free of cost or at concessional rate to the employee by the assessee; (iv) payment by the assessee of any sum in respect of any obligation which, but for such payment, would have been payable by the employee; (v) payment by the assessee of any sum, whether directly or through a fund, other than a recognized provident fund or an approved superannuation fund, to effect an assurance on the life of the employee or to effect a contract for an annuity; (vi) the amount treated as a perquisite under sub-clause (vi) of clause (2) of section 17." From a reading of the aforesaid prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1990, with effect from April 1, 1967, provides that the cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of the Government of India and section 28(iiic) provides that any duty of customs or excise repaid or repayable as drawback to any person against exports under the Customs and Central Excise Duties Drawback Rules, 1971 is chargeable to income-tax under the head "Profits and gains of business or profession". In this view of the matter, the cash incentive received by the applicant under the Export Promotion Scheme is clearly chargeable to income-tax under the head "Profits and gains of business or profession." Thus the Tribunal was justified in upholding the addition. In respect of weighted deduction claimed under section 35B(iii) of the Act it may be mentioned there that the weighted deduction is allowable only if they are wholly exclusively incurred for any of the purposes mentioned in various sub-clauses of section 35B(1)(b) of the Act. In the case of CIT v. Stepwell Industries Ltd. [1997] 228 ITR 171 the apex court has laid down the following principles for allowance of weighted deduction under section 35B o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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