TMI Blog1981 (3) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... an be disallowed as a revenue expense under the Act. The assessee is a private limited company carrying on business in dyes and chemicals. It paid to its employees salaries, dearness allowance and bonus. Some of the employees were also paid commission and bonus. There was no written agreement for the payment of the bonus or commission, and the percentage of commission paid to the employees varied from year to year and from employee to employee. In the course of the assessment proceedings for the assessment year 1964-65, the relevant previous year being the year ending on March 31, 1964, the ITO called for the details of the salary, dearness allowance, bonus and commission paid to the employees who had been paid in all more than Rs. 7,500 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Tribunal and urged before it that the expression " benefit or amenity or perquisite " used in the said s. 40(c)(iii) would include payment by way of bonus and commission. The Tribunal, accepting the reasoning of the AAC, affirmed the finding and dismissed the appeal. Thereafter, the department applied to the Tribunal for making a reference to this court, and by its order dated the 28th November, 1970, the Tribunal referred the following question of law: " Whether, on the facts and in the circumstances of the case and on a proper interpretation of section 40(c)(iii) of the Income-tax Act, 1961, the sum of Rs. 18,133 was not deductible in computing the income under the head 'Profits and gains of the business'? " That is how the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provision of any benefit or amenity or perquisite, whether convertible into money or not, to an employee (including any sum paid by the company in respect of any obligation which but for such payment would have been payable by such employee), to the extent such expenditure exceeds one-fifth of the amount of salary payable to the employee for any period of his employment after the aforesaid date: Provided that in computing the aforesaid expenditure any payment by way of gratuity or the value of any travel concession or assistance referred to in clause (5) of section 10 or passage moneys or the value of any free or concessional passage referred to in sub-clause (i) or any payment of tax referred to in sub-clause (vii) of clause (6) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , " amenity" and "perquisite " cash to the employees, the question of the cash being convertible into money or not would not arise. That was yet another pointer that the Legislature had no intention to include cash or money paid directly to the employees, in the said sub-clause. Yet another indication of the said intention of the Legislature was the fact that in sub-cl. (i) of the said cl. (c) of s. 40, the word " remuneration " was retained along with the other words " benefit " and " amenity " even after the aforesaid amendment of sub-cl. (iii). This also further showed that the Legislature was conscious of the distinction between the relevant words, and keeping in mind the said distinction the Legislature had deliberately chosen to delet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took the view that in order to term a payment as a perquisite it had to be a payment other than a cash payment in pursuance of a contract of service. As the payment in that case was cash payment, the same did not constitute perquisite and hence could not be disallowed under s. 40(c)(iii) or s. 40(a)(v) of the Act. We are, therefore, of the view that the finding recorded by the Tribunal that the amount paid by way of bonus and commission to the employees was not covered by the provisions of sub-cl. (iii) of cl. (c) of s. 40 of the Act and, therefore, the same could not have been disallowed as revenue expenditure by the ITO is correct and proper. In the circumstances, we answer the question as follows: That the said amount would be deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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