TMI Blog1981 (11) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... ards. The assessee had claimed depreciation for the factory buildings and this had been allowed in the previous years. During the accounting year 1970-71, some properties were sold. The assessee showed capital gains, computing the capital gains on the land and the capital gains on the factory buildings separately. The question of capital gains on the land is not relevant for the purpose of these references. The references concern only capital gains on the buildings. The sale price in respect of Calicut Weaving Factory was Rs. 20,000. The original value of the building was Rs. 10,000 and there was an additional expenditure of Rs. 979. Depreciation had been allowed on the value of the buildings in the earlier years. The assessee showed a capital loss of Rs. 78 on the sale of the buildings at Calicut. This was by revaluing the buildings as on January 1, 1954. The stand taken by the assessee was that it had the option under s. 55(b) of the I.T. Act either to adopt the written down value of the building or the value of the building as on January 1, 1954, and it chose the latter. It is on this basis that the assessee showed a loss of Rs. 78. The ITO took the view that the assessee does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... salary was only Rs. 11,400, any excess over 1/5th of the salary as perquisites was to be disallowed under s. 40(a)(v) of the Act. 1/5th of Rs. 11,400 was only Rs. 2,280. The excess of Rs. 1,260 was, therefore, disallowed by the ITO. The AAC deleted the addition by way of such disallowance. But by mistake he mentioned the sum as Rs. 1,800. The Tribunal, on appeal, held that house rent allowance should not be treated as part of perquisites. Consequently, the addition made was deleted. The question that arises from this at the instance of the Commissioner of Income-tax is: " Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in deleting Rs. 1,260 towards house rent under section 40(a)(v) of the Income-tax Act, 1961 ?" We will first consider the question referred at the instance of the assessee. Under s. 45(1) of the Act, any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income-tax as it is deemed to be the income of the previous year in which the transfer took place. In the case of the assessee, the transfer of the buildings at Calicut and those of Mangalore took place dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares of larger amount than its existing shares, (b) the conversion of any shares of the company into stock, (c) the reconversion of any stock of the company into shares, (d) the sub-division of any of the shares of the company into shares of smaller amount, or (e) the conversion of one kind of shares of the company into another kind, means the cost of acquisition of the asset calculated with reference to the cost of acquisition of the shares or stock from which such asset is derived." We have particularly to notice that the " cost of acquisition " as defined in s. 55(2) is " for the purposes of ss. 48 and 49 " only. As the I.T. Act stood during the relevant assessment year in place of the date 1st January, 1964, the date was 1st January, 1954, and for the purposes of the case here that is the date which is relevant. It is evident that in a case falling within ss. 48 and 49, the assessee had an option to adopt either the fair market value of the asset as on January 1, 1954, or the cost of acquisition of the asset to the assessee. If it was more advantageous to him to adopt the value as on January 1, 1954, he was free to do so. It is this option that is sought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject to the modification that the written down value as defined in cl. (6) of s. 43 of the asset as adjusted shall be taken as the cost of acquisition of the asset. Hence, though s. 55(2) gives an option to an assessee to choose one of the two values as the cost of acquisition for the purpose of s. 48, in a case to which s. 50 applies, s. 48 had to be read subject to the modification and, consequently, the option would not be available. The cost of acquisition would have to be taken in such a case has returned down value as defined in cl. (6) of s.43. That is what the ITO did. That, according to us, is the correct approach. We are not impressed with the contention of the learned counsel for the assessee that since the definition of " cost of acquisition" in s. 55(2) will apply for the purpose of s. 48 and this is a case to which s. 48 would so apply, s. 55(2) must govern despite s. 50 of the Act. That would be to render s. 50 inoperative. We do not see why we should resort to such construction. While the option contemplated under s. 55(2) of the Act will be available in every case where capital gains is determined in accordance with s. 48, that would not be the case where what is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 10; (d) any payment of tax referred to in sub-clause (vii) or subclause (viia) of clause (6) of section 10 ; (e) any sum referred to in sub-clause (vii) of clause (1) of section 17; (f) any sum referred to in sub-clause (v) of clause(2) of section 17; (g) the amount of any compensation referred to in sub-clause (i) or any payment referred to in sub-clause (ii) of clause (3) of section 17; (h) any payment referred to in clause (iv) or clause (v) of sub-section (1) of section 36; and (i) any expenditure referred to in clause (ix) of sub-section (1) of section 36 : Provided further that nothing in this sub-clause shall apply to any expenditure which results directly or indirectly in the provision of any benefit or amenity or perquisite to an employee whose income chargeable under the head 'Salaries' is seven thousand five hundred rupees or less. Explanation 1.-The provisions of this sub-clause shall apply notwithstanding that any amount not to be allowed under this sub-clause is included in the total income of the employee. Explanation 2.-In this sub-clause, the word 'salary' shall have the meaning assigned to it in clause (h) of rule 2 of Part A of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han the salary outside the scope of the term " benefit, amenity or perquisite ". It is evident that the enumeration of benefit, amenity and perquisite is intended to cover exhaustively all that an employee may get in any form other than his salary. In other words, between salary on the one hand and benefit, amenity or perquisite on the other whatever an employee would get from his employer in cash or kind or services must stand exhausted. It may not be necessary to consider whether an allowance paid by way of house rent allowance falls within the term " perquisite ". It is sufficient for the purpose of this case to consider whether it would fall within the scope of the term " benefit, amenity or perquisite ", since, if it does, s. 40(a)(v) would operate to restrict the claim for deduction in respect thereof. It is in that context and particularly keeping in mind the object of the provision that we have indicated that what the law purports to do is to limit what an employer can claim by way of deduction on account of payment to his employee by way of benefit, again in the extended sense of that term. The only question before us is whether despite the very clear indication by reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er benefits that are extended to an employee. Though the words " whether convertible into money or not may at first sight appear to indicate that whatever are not convertible into money stand excluded from the scope of the term " benefit, amenity or perquisite ", that need not necessarily be so. The term " benefit, amenity or perquisite " may take in any benefits in kind and in service and may take in also cash. " Whether convertible into money or not" need not qualify the whole range. It only means that it is immaterial whether the benefit, perquisite or amenity may or may not be convertible into money. That would be immaterial. According to us, this would be the proper reading of the section. In the result, we answer the question referred at the instance of the assessee in the affirmative and the question referred at the instance of the Commissioner in the negative. That means that both the questions are answered in favour of the revenue and against the assessee. A copy of the judgment under the seal of the High Court and the signature of the Registrar will be sent to the Income-tax Appellate Tribunal, Cochin Bench, as required under s. 260(1) of the Act. - - TaxTMI - TMIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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