COMMISSIONER OF INCOME TAX Vs. INDIA RADIATORS LIMITED

JUDGEMENT

(1.) THE assessee is a controlled company for the purpose of the Act. For the assessment year 1967-68 corresponding to the year ending March 31, 1967, it had given perquisites in the shape of rent-free quarters, free conveyance and insurance premium to three of its employees drawing salary in excess of Rs. 7,500 per annum in addition to certain payments of bonus. THE Income-tax Officer in calculating perquisites admissible under Section 40(c) of the Income-tax Act excluded the bonus paid, the value of the rent-free quarters and free conveyance, etc. On an appeal, the Appellate Assistant Commissioner, while confirming the exclusion of the value of rent-free quarters, free conveyance and insurance premium, directed the inclusion of the bonus in the salary paid for the purpose of calculating the value of the perquisites admissible. THE revenue preferred an appeal to the Tribunal against this order of the Appellate Assistant Commissioner contending that only salary proper could be taken into account for the purpose of finding out the admissible and all other allowances and perquisites should be excluded. According to the department, bonus is not salary or included in the salary and that it may be either an allowance or perquisite and that the order of the Appellate Assistant Commissioner was wrong. THE Tribunal referred to the relevant provisions and ultimately held that the bonus would be more or less in the nature of a salary and in the absence of an express exclusion of bonus it had to be held that the Appellate Assistant Commissioner was justified in holding that the salary would include bonus also. At the instance of the revenue the following question has been referred:

(2.) SECTION 40 of the Income-tax Act, as it was in the relevant assessment year, provided that the amounts referred to in that provision shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession". SECTION 40(c)(iii) of the Act, which is the relevant provision on which the revenue relied for not excluding the bonus in calculating the disallowance, reads as follows :