COMMISSIONER OF INCOME TAX Vs. MADURA COATS LIMITED

JUDGEMENT

(1.) THE question of law referred for our consideration, at the instance of the Revenue, relating to the assessee's assessment for its assessment year 1976-77 reads as under :

(2.) THE assessee went in appeal against the order of assessment made to the Commissioner of Income-tax (Appeals). THE contention urged on behalf of the assessee before the Commissioner (Appeals) was that the major portion of the expenditure by way of maintenance inclusive of the depreciation incurred by the company in respect of cars, even though used by the directors and employees, was mainly for the company's business purpose and only a portion of the expenditure should be considered as relating to the personal use of cars by the employees and directors. THE Commissioner (Appeals), following an earlier order passed by his predecessor held that only a portion of the expenditure relatable to the user of the cars provided by the company to its employees or directors for the personal use should be disallowed as perquisite. He calculated the perquisite value at Rs. 400 per month in the cases of employees and directors and on that basis, he came to the conclusion that in so far as Section 0A(5) is concerned, the additional amount that should be disallowed over and above what had been added back by the assessee was Rs. 3,573 and he held that the assessee was entitled to the relief of Rs. 2,68,700. As regards the directors, he came to the conclusion that the amount added back by the asses-see was more than adequate and the entire disallowance was deleted.

(3.) IN Wheels INdia Ltd. v. CIT, 1996 218 ITR 293, this court has held that in computing the disallowance under Section 40(c) and Section 40A(5) of the Act, the actual expenditure on house rent of the employees has to be taken into consideration for the purpose of disallowance in the hands of the employer. This court expressly dissented from the decision of the Calcutta High Court in the case of CIT v. Britannia INdustries Co. Ltd., 1982 135 ITR 35, and the decision of the Punjab and Haryana High Court in CIT v. Nuchem Plastics Ltd., 1989 179 ITR 196. Learned counsel for the assesses, on the other hand, submitted that the decision of this court in Wheels INdia Ltd.'s case [1996] 218 ITR 293, is concerned with the expenditure by way of house rent and it has no application for the valuation of perquisite on the car provided by the employer to the director. We are unable to accept the contention of learned counsel for the assessee. There is no material difference between the use of a car and the use of a house, and in the light of the ambit of Sections 40(c) and 40A(5) of the Act, the principle laid down by this court that only the actual expenditure has to be taken will apply in the case of use of the car also. As a matter of fact, in CIT v. P.R. Ramakrishnan, 1980 124 ITR 545, this court was considering the use of the car and telephone of the company by the director for his personal purposes and this court considering the provisions of Section 40(c) of the Act and the relevant Rule regarding the valuation of perquisite in the hands of the employee made the following observations which are applicable to the facts of the case (page 555) :