TMI Blog1986 (6) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... paid to society painting charges Repairs and Plumbing -------------------------------------------------------------------------------------------- Rs. Rs. Rs. Rs. -------------------------------------------------------------------------------------------- Daisyle 10,761 3,600 6,415 3,630 755 Darshan 10,730 1,800 2,480 1,622 Cynthia 16,354 1,800 4,760 90 -------------------------------------------------------------------------------------------- The IAC treated both the rent of said accommodation as well as the aforesaid expenses on repairs, etc., at Rs. 26,952 as includible for calculating disallowance under section 40A (5). As per para 6 of the assessment order, the IAC followed his order for he assessment year 1976-77 (the said order has not been made available to us). 3. The Commissioner (Appeals) vide para 4 upheld the IAC's order on this point after distingu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said two flats. 7. the learned counsel for the assessee lied on the Tribunal, Bombay bench 'C's order in IAC v. Mercantile Bank Ltd. [1984] 7 ITD 198, where it was held that section 40A (5) (a) (ii) contained a special provision relating to expenses incurred directly or indirectly in the provision of perquisite the said sub-section thereafter had a general provision dealing with expenditure in respect of any asset of the employer company used by the employee. As rent-free accommodation will be covered by definition of 'perquisite' under Explanation 2(b) (i) of the said section, therefore, such expenditure could not be considered as an expenditure in respect of any asset of the assessee-company used by the employees, because the special provision in respect of rent-free accommodation would apply in view of rule generally specials non derogant. the Bench, thus, held that the expenditure incurred on maintenance of flats should be considered only under 'perquisite' and that this aspect was not considered by the Full Bench of the Kerala High Court in CIT v. Forbes Ewars Figgis (P.) Ltd. [1982] 138 ITR 1. The Bench held that the repairs and maintains do not per se provide rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any and not on the value of the said perquisite as computed under section 17(2), read with rule 3 of the Income-tax Rules, 1962 ('the Rules'), in the hands of the employee. 11. At this point, we may refer to the aforesaid decision in Bombay Burmah Trading Corpn. Ltd.'s case. In the said decision, the Bombay High Court explained the Calcutta High Court decision in Britannia Industries Co. Ltd.'s case that as both the parties before the Calcutta High Court were unable to apportion the expenditure on personal use of car, therefore, the Calcutta High Court took recourse to rule 3. The Bombay High Court observed that the aforesaid Calcutta high Court decision cannot be read as an authority that in all cases, the value of perquisite in the hands of the employee is to be cases computed in accordance with relevant rule of the Rules. The Bombay High Court, accordingly, held that, considering plain language of section 40(c) (iii), the entire expenditure incurred by the employer has to be taken into consideration as value of benefit, amenity or perquisite. In this respect provisions of section 40(c) (iii) and 40A (5) are para materia. 12. We have carefully considered the submissions of bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other expenses incurred by the employer in respect of the said flat for convenience or benefit of the employee. Both the rent and other expenditure would fall in the same category, namely, all expenditure which results directly or indirectly in the provision of any perquisite to the employee. 15. In this background, we would respectfully follow the Bombay High Court decision in Bombay Burmah Trading Corpn. Ltd.'s case for taking the view that actual expenditure incurred by the employee has to be taken into consideration for the purpose of applicability of section 40A (5). To the same effect are the observations of the Full Bench of the Kerala High Court in Forbes Ewart Figgis (P.) Ltd.'s case which has been followed in Travancore tea Estates Co. Ltd. v. CIT [1985] 154 ITR 745 (Ker.). 16. The Calcutta high Court's decision in CIT v. Davidson of India (P.) Ltd. [1984]148 ITR 544 is distinguishable because in that case the employer company as a lessee had undertaken to maintain the flats in a good habitable condition and the Tribunal gave a finding of fact that employer would have to undertake the repairs to flats in the normal course and that there was no evidence to show that r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of employee computed in accordance with the relevant rules need not be ascertained. The Tribunal, Special Bench, Bombay in American Express International Banking Corpn. v. IAC [1983] 6 ITD 373 at pages 388-389 (vide paras 19-22) followed the aforesaid Bombay High Court decision in Bombay Burmah Trading Corpn. Ltd.'s case, after noting that the Bombay High Court had distinguished the decision in Britannia Industries Co. Ltd.'s case. 21. Respectfully, following the said decision we uphold the orders of lower authorities in taking into consideration the actual expenditure incurred by employer in providing rent-free accommodation to the employees. 22. Ground No. 1 (c) : The assessee-company had sold some cars to its employees. One such car was sold to Mr. S. P. Trehan for Rs. 9,000 (9,500). The IAC noted that a car of similar model was sold to an outsider for Rs. 17,500. The IAC rejected the certificate filed by the assessee company from a supervisor of Ram Service Station, Delhi supporting the said sale price. The IAC estimated at Rs. 17,000 the market value of car sold and considered under section 40A (5) the balance of Rs. 8,000 as perquisite to Mr. Trehan. The Commissioner ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We are unable to see any infirmity in the order of the Commissioner (Appeals) which we accordingly confirm. 27. Ground No. 6 of the assessee's appeal and ground No. 3 of revenue's appeal : The IAC had treated Rs. 13,500 paid to A. F. Fergusons Co. as payments for taxation matters which was hit by section 80VV of the Act under which section only Rs. 5,000 was allowable on expenditure incurred in respect of any proceedings before any income-tax authority relating to determination of any liability under the Act by way of tax, penalty or interest. The IAC had accordingly allowed Rs. 5,000 and disallowed the balance of Rs. 8,500. The Commissioner (Appeals) vide para 14 of his order noted that out of the said expenditure. Rs. 5,000 was not relatable to proceedings before any income-tax authority and was, therefore, allowable. Before us, it is further contended that some more deduction should have been allowed in respect of proceedings under the Companies (Profits) Surtax Act, 1964. We accept this contention and hold that Rs. 1,500 was relatable to surtax liability. Taking into consideration the reduction allowed by the Commissioner (Appeal), only disallowance of Rs. 2,000, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show the origin of the said amounts and the reasons for writing off the said amounts in the year under consideration by transfer to profit and loss account. In the absence of any evidence, normal presumption would be that the amounts in question were received as part of trading receipts (of dealing in photographic goods, etc.) of the assessee-company and were the unclaimed balances out of the said trading receipts. Thus, decision in CIT v. Batliboi Co. (P.) Ltd. [1984] 149 ITR 604 (Bom.), would apply in the assessee's case where in was held that the excess deposits received by the said dealer in machinery from the intending purchasers of machinery were not held by the said dealer for the benefit of the depositors and that the deposits were in respect of its specific transactions of sale and was adjusted towards purchase price of machinery sold and had a close connection with the transactions of sale and since the assessee transferred the access deposit remaining in its hand to profit and loss account, it was assessable to tax as a trading receipt in the hands of the assessee. The Bombay High Court had followed decisions in CIT v. Motor General Finance Ltd. [1974] 94 ITR 582 (D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the said decision, we modify the Commissioner (Appeals)'s order on this point. 37. Club Fees : Club fees of Rs. 3,095 in the case of three employees were included by the IAC for considering applicability of section 40A (5). The Commissioner (Appeals) following the aforesaid Tribunal's order in the assessee's case for the assessment year 1975-76, held that the said club fees were not perquisite. We uphold the Commissioner (Appeals)'s order on this point by following Tribunal's decision for the assessment year 1975-76 in the assessee's case. 38. Gratuity of Rs. 1.31 lakhs : Contribution for gratuity of Rs. 1.31 lakhs was made in the assessment year 1974-75 and thought the said payment was disallowed in the assessment, it was allowed in appeal. The IAC, accordingly, rejected the assessee's claim of deduction of this amount again in the assessment year under consideration (assessment year 1977-78). The Commissioner (Appeals)'s vide para 10, noted the assessee's contention that in the assessment year 1974-75, the Tribunal had reversed the Commissioner (Appeals)'s order and had upheld the disallowance. In these circumstances, the Commissioner (Appeals) directed the IAC to verify t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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