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TMI Blog2004 (10) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... carriage of goods and insurance, while on transit? 3. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the assessee was entitled to extra shift allowance in regard to machinery added during the year on the basis of the number of days the particular machinery was actually put to use? 4. Whether, on the facts and in the circumstances of the case, the cash incentive of Rs. 16,01,547 received by the assessee under the Export Promotion Scheme benefits from the Government represented the income of the assessee taxable within the ambit and scope of the charging provisions of the Income-tax Act, 1961 and was, therefore, rightly included in its total income for the assessment year 1976-77?" Whereas in Income-tax Reference No. 112 of 1985 which relates to the assessment years 1977-78 and 1978-79, the Tribunal has referred the following questions of law under section 256(1) of the Act for the opinion of this court: "1. Whether, on the facts and in the circumstances of the case, the assessee is entitled to weighted deduction under section 35B of the Income-tax Act, 1961, in respect of expenses incurred on expor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed deduction under section 35B of the Act in respect of its expenses allowing export levy paid to Cotton Textiles Export Promotion Council for carriage of goods from Kanpur to Bombay and other insurance was also rejected on the ground that the expenses were incurred in India and, therefore they were not entitled to weighted deduction under section 35B(1)(b)(iii) of the Act. For the assessment years 1976-77, 1977-78 and 1978-79, the applicant received Rs. 16,01,547, Rs. 12,26,739 and Rs. 11,37,356, respectively, as Export Promotion Scheme benefits. It had credited this amount to its profit and loss account. Before the Inspecting Assistant Commissioner it was claimed that it was not a taxable receipt. The claim was rejected on the ground that it was not income of any casual nature. During the assessment year 1977-78, the applicant had provided rent-free accommodation to Sri M.S. Nathan and one of its officers. The Inspecting Assistant Commissioner had included the expenditure of maintenance and repairs of the said accommodation as also certain percentage of the salary towards the expenditure on amenities and benefits for rent-free accommodation being 10 per cent, of the salary. In r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y expenditure which results directly or indirectly in the provision of any perquisite (whether convertible into money or not) to an employee or incurs directly or indirectly any expenditure or is entitled to any allowance in respect of any assets of the assessee used by an employee either wholly or partly for his own purposes or benefit, then, subject to the provisions of clause (b), so much of such expenditure or allowance as is in excess of the limit specified in respect thereof in clause (c) shall not be allowed as a deduction: Provided that where the assessee is a company, so much of the aggregate of- (a) the expenditure and allowance referred to in sub-clauses (i) and (ii) of this clause; and (b) the expenditure and allowance referred to in sub-clauses (i) and (ii) of clause (c) of section 40, in respect of an employee or a former employee, being a director or a person who has a substantial interest in the company or a relative of the director or of such person, as is in excess of the sum of (one hundred and two thousand rupees) shall in no case be allowed as a deduction: Provided further that in computing the expenditure referred to in sub-clause (i) or the expenditure o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s used by an employee is to be treated for computing the value of disallowance and even the rent-free accommodation provided to the employee is treated to be a perquisite. In the case CIT v. Empire Dyeing and Manufacturing Co. Ltd. [1991] 192 ITR 245 (Bom) the Bombay High Court has held that the provision of accommodation to the employee in premises belonging to the company amounted to a perquisite within the meaning of section 40A(5) of the Act. The depreciation on his furniture is to be considered as allowance in respect of the assets of the applicant used by the employee and, therefore, falls within the purview of section 40A(5)(a)(ii) of the Act. In C.W.S. (India) Ltd. v. CIT [1994] 208 ITR 649 (SC) the apex court has held that the expression "allowance" in section 40(a)(v) and section 40A(5)(a)(ii) of the Act takes in depreciation allowance and the ceiling on expenditure provided under these provisions applied also to depreciation allowance on all assets belonging to the employer-assessee used by an employee. In this view of the matter, the Tribunal was justified in upholding the inclusion of the value of the rent-free accommodation and depreciation allowance while computin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (b) of section 35B(1) of the Income-tax Act, 1961. The onus is on the assessee to prove that he is entitled to weighted deduction allowed under section 35B. In order to get this deduction, the assessee will have to prove that the expenditure was incurred during the previous year wholly and exclusively for the purposes set out in clause (b) of section 35B(1). There cannot be any blanket allowance of the expenditure nor can there be any blanket disallowance. Every case has to be discussed specifically and the expenditure must be found to be of the nature mentioned in any one of the sub-clauses. If the expenditure does not fall in any of these categories, it cannot be allowed as a deduction. Some of the sub-clauses provide that if the expenditure is incurred in India, it cannot be allowed but in some of the sub-clauses this requirement is not there. In such cases, the expenditure may or may not be incurred in India. Every case will have to be examined in the light of the provisions of the sub-clauses and the facts proved by the assessee." The apex court has further held that: "The expenditure which qualifies for deduction under section 35B(1)(b)(iii) will have to be expenditure i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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