TMI Blog1995 (2) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... er, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the actual expenditure on house rent of employees should be taken into consideration for the purpose of disallowance under section 40(c)/40A(5) ? " In computing the disallowance under section 40(c) of the Act relating to the managing director, S. Ram, and the director, V. R. Srinivasan, the Income-tax Officer, inter alia, included the actual rent paid by the assessee in respect of the rent-free accommodation provided to these persons in the sums of Rs. 13,400 and Rs. 9,000, respectively. Before the Commissioner of Income-tax (Appeals), the assessee contended that in respect of the rent-free accommodation, only the income-tax valuation s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Supreme Court in Bharat Hari Singhania v. CWT [1994] 207 ITR 1 and CIT v. Britannia Industries Co. Ltd. [1982] 135 ITR 35 (Cal). On the other hand, learned junior standing counsel appearing for the Department, submitted that in the present case, we are concerned with the assessment to be made in the hands of the employer under sections 40(c) and 40A(5) of the Act. All that we are concerned with is only the expenditure incurred by the assessee in respect of which payment has been made or is to be made to any person who is an employee of the employer. Therefore, the application of the provisions of rule 3 of the Rules has no relevance in the present case. Learned standing counsel further submitted that when rule 3 of the Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CIT v. Malayalam Plantations (India) Ltd. [1990] 186 ITR 322 (Ker), held that in the matter of assessing the cash payment made by the assessee-company to its employees by way of house rent allowance it should be assessed not at ten per cent. of the actual rent paid by the employer, but the actual amount paid by the employer by way of allowance of house rent. In the matter of assessing the allowance of rent by the employer to the employee, rule 3 of the Rules has no application. In the case of Bombay Burmah Trading Corporation Ltd. v. CIT [1984] 145 ITR 793, the Bombay High Court, while considering the provisions of section 40(c)(iii) of the Act, explained the decision of the Calcutta High Court in CIT v. Britannia Industries Co. Ltd. [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his hands. This rule does not apply to the computation of the value of the perquisite for making the disallowance under section 40A(5) of the Act in the assessment of the employer-company. In the abovesaid decision, the Calcutta High Court, following the view expressed by the Bombay High Court in Bombay Burmah Trading Corporation Ltd. v. CIT [1984] 145 ITR 793 held that it will have no application in the matter of assessment to be made in the hands of the employer with regard to house rent allowance given to its employees. Similarly, in CIT v. P. R. Ramakrishnan [1980] 124 ITR 545, this court, while considering the provisions of sections 2(24)(iv) and 40(c) of the Act, held that section 40(c) of the Act can be applied to the case of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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