COMMISSIONER OF INCOME TAX Vs. MANJUSHREE PLANTATIONS LIMITED

JUDGEMENT

(1.) THE assessee is a public limited company. In making the assessments for the assessment years 1968-69 to 1971-72, the ITO disallowed certain amounts in each year representing leave allowance paid in cash to certain of its employees. THE view of the ITO was that these payments would either amount to salary or benefit or perquisite within the meaning of s. 40(c)(iii) or the substituted s. 40(a)(v), as the case may be. This view was confirmed by the AAC. But, on further appeal, the Tribunal held that the cash amounts paid as leave allowance were neither salary, nor benefit or amenity or perquisite, and as such, the disallowance was improper. Though the Tribunal had considered the question whether the leave allowance would be salary, or benefit or amenity or perquisite, the revenue sought a reference only on the question whether the leave allowance was not a perquisite, and the two questions that are referred to us read as follows:

(2.) THE matter is not res integra. It has been decided by the Calcutta High Court with reference to the same provision in CIT v. Kanan Devan Hills Produce Company Ltd. [1979] 119 ITR 431 and it was to the effect that any cash payment directly made to the employee cannot be considered to be a perquisite within the meaning of s. 40(c)(iii) of the I.T. Act, 1961, or the corresponding later provision, s. 40(a)(v). In a batch of Special Leave Petitions Nos. 2970/76, etc., the revenue raised a question whether bonus, house rent allowance and conveyance allowances paid to the employees are not perquisites and those petitions were dismissed by the Supreme Court. It appears that in those decisions which arose from the orders of the Bombay Benches of the Income-tax Appellate Tribunal, the Tribunal had held that cash payments made by the employer to the employees in terms of service conditions cannot be treated as perquisites for the purpose of disallowance under s. 40(c)(iii) or s. 40(a)(v). THE petitions filed under s. 256(1) before the Bombay High Court also were dismissed in the view that the expression "perquisite" would cover only non-cash benefits to the employees. It also appears that it was brought to the notice of the learned judges of the Supreme Court that the Central Board of Direct Taxes had also issued certain circulars from time to time that payments made to the employees under the terms of service cannot be treated as perquisites. Since these facts were on record we think that the Supreme Court ultimately did not consider it necessary to dictate a lengthy or reasoned order but dismissed the same in limine. This court in CIT v. G. Venkataraman [1978] 111 ITR 444 had occasion to consider a similar provision contained in s. 2(6C)(iii) of the Indian I.T. Act, 1922, which defines income as including "the value of any benefit or perquisite, whether convertible into money or not obtained from a company".