TMI Blog1992 (5) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... al expenses to an employee is not perquisites' within the meaning of section 40A(5) of the Income-tax Act, 1961 ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the quantum of perquisites to an employee on account of rent for residential accommodation or concession in the matter of rent had to be computed with reference to the expenditure in the hands of the employer, and not with reference to rule 3 of the Income-tax Rules, 1962 ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the cash allowances, namely, the car allowance and that the house rent allowance, could not be treated as part of the salary for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of evaluating that perquisite. The Tribunal upheld the decision of the Appellate Assistant Commissioner while coming to the conclusion that conveyance allowance and house rent allowance, being cash allowances, could not form part of perquisites. In respect of medical expense also, it came to the conclusion that the cash reimbursement could not form part of the perquisite. It further held that the quantum of perquisites to an employee on account of rent for residential accommodation, or concession in the matter of rent, had to be computed with reference to the expenditure in the hands of the employer and not with reference to rule 3 of the Income-tax Rules, 1962. The Tribunal, however, held that cash allowances which were paid, namely, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 seventy-two thousand rupees, shall in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in [1982] 137 ITR 827 (Cal) (Indian Leaf Tobacco Development Co. Ltd. v. CIT) ; [1983] 139 ITR 763 (Cal) (CIT v. Orient Paper Mills Ltd.); [1984] 145 ITR 457 (Cal) (CIT v. National and Grindlays Bank Ltd.) ; [1986] 161 ITR 820 (Cal) (Alkali and Chemical Corporation of India Ltd. v. CIT) ; [1987] 165 ITR 558 (Cal) (Union Carbide India Ltd. v. CIT) ; [1986] Tax LR 483 (Cal) (CIT v. Darjeeling Co. Ltd.) ; [1989] 176 ITR 331 (Cal) (CIT v. Indian Press Exchange Ltd.) ; [1989] 180 ITR 275 (Cal) (National and Grindlays Bank Ltd. v. CIT) ; [1991] 192 ITR 144 (Cal) (CIT v. Indian Explosives Ltd.) and [1990] 184 ITR 339 (Cal) (CIT v. Indian Oxygen Ltd.). The Bombay High Court followed the aforesaid decision in Kanan Devan Hills Produce Co. Ltd. [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). The Karnataka High Court has also come to the same conclusion in CIT v. Mysore Commercial Union Ltd. [1980] 126 ITR 340 and this was followed by it in [1988] 173 ITR 374 (Kar) (CIT v. Motor Industries Co. Ltd.). Two decisions of the Kerala High Court in favour of the aforesaid view of the Calcutta High Court are [1984] 145 ITR 563 (CIT v. Toshiba Anand Lamps Ltd.) and [1985] 153 ITR 444 (Travancore Tea Estates Co. Ltd. v. CIT). As far as this court is concerned, the view of the Calcutta High Court in Kanan Devan Hills Produce Co. Ltd. [1979] 119 ITR 431 has found favour. In the case Instalment Supply P. Ltd. v. CIT [1984] 149 ITR 457 (Delhi), it was held by this court that reimbursement of medical expenses by paying cash to the employe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that is expenditure in respect of any assets of the company which are used by an employee for his own purposes or benefit. The cash payment or reimbursement is not included in this sub-clause at all. Therefore, while agreeing with the aforesaid decisions, question No. 1 has to be answered in the affirmative and in favour of the assessee. As far as question No. 3 is concerned, in Instalment Supply P. Ltd.'s case [1984] 149 ITR 457, the Division Bench of this court has observed as under (at page 465): "As a matter of fact, the use of the words 'whether convertible into money or not' goes to show that the term 'benefit or amenity or perquisite' cannot relate to cash payments. Any cash payment could well be part of the salary as given in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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