TMI Blog1992 (11) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... was right in holding that depreciation allowance given under section 32(1)(iv)/35(2)(ia) of the Act are disjunctive and cumulative and not alternative and, accordingly, upholding the grant of the depreciation allowance on items of building, plant and machinery used for scientific research in the relevant accounting year and on which appropriate deductions in the earlier year have been allowed under section 35(1)(iv)/35(2)(ia) of the Act ? " The first question relates to the assessment years 1972-73 and 1973-74 only whereas the second question relates to the assessment years 1972-73, 1973-74 and 1974-75. Before we proceed to state the facts and deal with the controversy raised by question No. 1, it may be expedient to answer question No. 2 as it is stated at the Bar that the controversy raised therein stands concluded in favour of the Revenue by a recent decision of the Supreme Court in the case of Escorts Ltd. v. Union, of India [1993] 199 ITR 43 ; [1992] 2 Scale 867. Following the same, question No. 2 has to be answered in the negative and in favour of the Revenue. We answer the same accordingly. We may now turn to question No. 1. The relevant facts are as follows. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance has been made for this category of employees. Sub-sections (5)(a) and (c) Of section 40A, so far as relevant, are set out below: " (5)(a) Where the assessee (i) incurs any expenditure which results directly Pr indirectly in the payment of any salary to an employee or a former employee, or (ii) incurs any 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 di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a company which results directly or indirectly in the payment of salary to an employee or a former employee ; sub-clause (ii) deals with expenditure which results directly or indirectly in the provision of any perquisite to an employee or any expenditure or allowance in respect of any assets of the assessee used by an employee either wholly or partly for his own purposes or benefit. If such expenditure referred to in the aforesaid two sub-clauses is incurred by company, then subject to the provisions of clause (b) with which we are not concerned in the present case so much of such expenditure or allowance as is in excess of the limit specified in respect thereof in clause (c) would not be allowed as a deduction. In clause (c), the limits of expenditure for allowability of expenditure referred to in clause (a) have been specified. Separate limits have been fixed for expenditure mentioned in sub-clause (i) and sub-clause (ii) of clause (a). These limits apply to payments made to all persons covered by clause (a). The substantive provision of clause (a) clearly takes within its ambit all persons employed by the A company. Had there been no proviso to this clause, this provision and al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontext, setting and purpose of the provision warrants a different construction. Reading the proviso to clause (a) in the instant case with reference to the scheme of sub-section (5), it is clear that its object is to take out of the scope of clause (a)of sub-section (5) certain categories of employees referred to therein for a different treatment in the matter of disallowance of expenditure. Any other interpretation will lead to anomalous situations. If we, read this proviso with clause (c), it is evident that it is difficult to give effect to the various limits specified therein on different items separately in addition to the aggregate limit of Rs. 72,000 put in the proviso. In clause (a), there is no aggregate ceiling. Only the limits specified in clause (c) on individual items of expenditure are applicable. But in the proviso, an aggregate ceiling has been put on the expenditure without laying down any ceiling on individual items of expenditure mentioned therein. In our opinion, by incorporating the proviso, the Legislature has taken out the case of employee-directors and other persons referred to therein from the substantive provision contained in clause (a) and has laid down ..... X X X X Extracts X X X X X X X X Extracts X X X X
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