TMI Blog1997 (2) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... installations from E.S.A.?" The assessee is a company. It paid by way of cash house rent allowance to its employees during the previous year relevant to the assessment year in question, amounting to Rs.15,337. Since the extent of deduction on account of salaries being paid to its employees for the purposes of computing the profits and gains arising out of its business is inhibited by the provisions of section 40A(5) of the Act, the Income-tax Officer included this sum in determining the amount of salaries paid to its employees for the purposes of finding out the extent to which the expenditure on account of salaries is to be disallowed under the aforesaid provisions. The assessee contested the case of the Assess ing Officer on the ground that such cash allowances are not to be considered as "salary", or "perquisite", within the meaning of section 40A(5) read with the Explanation thereto which determines the meaning of salary and perquisite for the purposes of the section. Sub-section (5) speaks about expenditure, the assessee incurs, which results directly or indirectly in the payment of any salary to an employee or a former employee, or incurs any expenditure which results direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 17, "salary" includes wages, as well as any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages. In terms of sub-clause (iv) of clause (1), while "perquisite" has been separately defined in clause (2), "profits in lieu of salary" in addition becomes the subject-matter of clause (3). The fact that the statute defines "salary", which includes wages and other things and also includes any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages, further indicates that the word "salary" is of wider import than wages simpliciter as ordinarily understood. Even in the ordinary sense, the term "salary" denotes the whole of the remuneration payable for the services rendered or the work done. It will be apt to refer to the opinion of Fry L.J., in Re Shile, Ex P Shine [1892] 1 QB 522 as to what is meant by "salary": "Whenever a sum of money has these four characteristics first, that it is paid for services rendered; secondly, that it is paid under some contract or appointment; thirdly that it is computed by time; and fourthly that it is payable at a fixed time--I am inclined to think it is salary--I do not mean to say ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses that but for the said provision, it is an income chargeable to tax under various heads under the Act. As section 10(13A) deals with an allowance granted to an assessee by his employer, it refers to income to be computed under the head "Salary". We are, therefore, of the opinion that the cash payment of house rent allowance does form part of "salary", as defined under section 17(1) read with section 17(3) for the purposes of section 40A(5) of the Income-tax Act, 1961. In our conclusion that cash payment for house rent allowance forms part of "salary", we are fortified by the decisions of the Delhi High Court in CIT v. Shriram Refrigeration Industries Ltd. [1992] 197 ITR 431, of the Andhra Pradesh High Court in M. Krishna Murthy v. CIT [1985] 152 ITR 163 and of the Karnataka High Court in Karnataka Electricity Board Employees' Union v. Union of India [1989] 179 ITR 521. Clause (b) of Explanation 2 defines "perquisite" for the purposes of the sub section. Sub-clauses (i), (ii) and (iii) obviously can have no application to the expenses incurred in cash as the same refer to the accommodation or benefit or amenity granted or provided free of cost or at a concessional rate to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to an employee, to the extent such expenditure or allowance exceeds one-fifth of the amount of salary payable to be employee, was to be disallowed while computing the profits and gains of business or profession. Section 40A(5)(a)(ii) refers only to perquisite. Therefore, the disallowance under section 40(a)(v) was confined to benefits or amenities or perquisites, but did not include salaries other than those paid to the employees. Under section 40A(5)(a)(i), the expenditure referred to is payment of any salary to an employee or a former employee by the assessee and sub-clause (ii) refers to expenditure, which results directly or indirectly in the provision of any perquisite (whether convertible into money or not), to an employee. In that regard, the need for determining the allowable and non-allowable expenditure incurred by the assessee for payment of salary and perquisites to the employees is widened. Noticing this distinction between the two provisions, though the question whether the cash allowance forms part of salary or not was not before the court, it opined: "These cash payments will, of course, be treated is salary paid to the employees and will be subject to the limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ool air can constantly blow in within the factory shed..." It made reference to the distinction between the exhaust fans and office fans and held that exhaust fans are machinery and form part of textile machinery when they are installed in the factory premises. This court had an occasion to consider a like question whether air-conditioners, which were held to be necessary requirement for the process of crimping artificial silk yarn in the factory manufacturing artificial silk yam, ought to be treated as part of a plant or machinery of the artificial silk manufacturing or is to be treated independently as air-conditioning machinery used for artificial silk manufacturing machinery/plant, in I.T.R. No. 346 of 1983, decided on December 4,1996 (CIT v. Kiran Crimpers [1997] 225 ITR 84 (Guj)). The court reached the following conclusions: (1) Under the scheme of the statutory provision, each apparatus conforming to the definition of "machinery" or "plant", as the case may be, has to be taken individually for the purpose of considering computation of depreciation and not the organisation or the unit as a whole by treating each and every apparatus, which is necessary for the functioning ..... X X X X Extracts X X X X X X X X Extracts X X X X
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