CIT COCHIN Vs. MALAYALAM PLANTATIONS INDIA LTD

JUDGEMENT

(1.) AT the instance of the Revenue, the Income Tax Appellate Tribunal has referred the following question of law, for the decision of this Court: " Whether, on the facts and in the circumstances of the case, the Tribunal is right: (i) in applying/relying on R. 3 (c) (ii) of the Income Tax Rules? (ii) in directing the ITO to value the perquisites of the car provided by the assessee to its employees as per Income Tax R. 3 (c) (ii) and to consider only this amount for disallowance under S. 40a (5)?"

(2.) THE respondent is a plantation company. We are concerned with the assessment year 1979-80. THE previous year ended on 31-3-1979. THE assessee had given cars for the use of the employees. In bringing to tax the income of the respondent company, the Income Tax Officer disallowed 1/3 rd of the expenditure and depreciation on the said cars. This was affirmed by Commissioner of Income Tax (Appeals ). But, in second appeal, the Income Tax Appellate Tribunal purporting to follow the decision of the Calcutta High Court in C. I. T. v. Britannia Industries Co. Ltd. (135 ITR 35), held that the Income Tax Officer has not considered the total use of the cars vis-a-vis the use of the cars relating to the personal use of the employees, that he had not given any details as to how he worked out the disallowance under S. 40a (5) of the Act and in these circumstances the Appellate Tribunal directed, the Income Tax Officer to value the perquisite of the cars provided by the assessee to its employees as per R. 3 (c) (ii) of the. Income Tax Rules and consider the disallowance under S. 40a (5) of the Act. It is thereafter, at the instance of the Revenue, the question of law formulated herein above has been referred for, the decision of this Court.

(3.) THE respondent is a public limited company. THE assessing authority was computing its taxable income. During the course of assessment, the assessing authority found that the assessee had given cars for the use of its employees. THErefore, the Income Tax Officer/assessing authority invoked S. 40a (5) of the Income Tax Act, and disallowed l/3rd of the expenditure and depreciation on the cars given for the use of its employees. This was concurred by the Commissioner of Income Tax (Appeals ). THE Income Tax Officer did not give the breakup of the disallowance under S. 40a (5) of the Act. Before the Tribunal, the plea of the assessee was that the valuation of perquisite for the purpose of disallowance under S. 40a (5) of the Act should be done in accordance with R. 3 (c) (ii) of the Income Tax Rules. Reliance was placed on the decision of the Calcutta High Court in Britannia Industries Co. Ltd. case (135 I. T. R. 35 ). THE Revenue contended that R. 3 (c) (ii) of the Income Tax Rules is applicable only for valuing the perquisite in the hands of the employees for assessment under the head 'salaries' and not for the purpose of the disallowance to be made under S. 40a (5) in the hands of the employer. THE detailed statement filed by the assessee before the Income Tax Officer showing salaries, expenses incurred and depreciation claimed on buildings and cars used partly for business and partly for personal purposes, was adverted to and it was contended by the Revenue that the assessee could have in a similar manner arrived at the amount actually" expended by it on the maintenance expenditure of the motor cars and depreciation which can reasonably be attributed to the personal use by the employees. THE Income Tax Appellate Tribunal held that the Income Tax Officer has not considered the total use of the cars vis-a-vis the use of the cars relating to the personal use of the employees, that the Income Tax Officer had not given any details as to how he worked out the disallowance at Rs. 4,46,500/- and so, in the circumstances, the Appellate Tribunal directed the assessing authority to value the perquisite of the cars provided by the assessee to the employees as per R. 3 (c) (ii) of the Income Tax Rules considered for disallowance under S. 40a (5) of the Act.