COMMISSIONER OF INCOME TAX Vs. AOROW INDIA LTD

JUDGEMENT

(1.) BY this reference under s. 256 (1) of the IT Act, 1961, at the instance of the Revenue, the Tribunal has referred the following question of law to this Court for opinion :-

(2.) THE assessee is a limited company. This reference pertains to asst. yr. 1983-84, the relevant previous year being the year ended on 30th June, 1982. In its assessment for the above assessment year, the assessee incurred certain expenditure in connection with travelling by its employees including hotel expenses and allowances. The ITO computed the disallowance out of such expenditure under s. 37 (3) of the IT Act, 1961 ("act") and r. 6d of the IT Rules, 1962 ("rules"), at Rs. 22,895. While computing the amount of disallowance under s. 37 (3) and r. 6d, the ITO took into account the total expenditure incurred by each employee in each trip undertaken by him. The assessee was aggrieved by the method of computation adopted by the ITO as, according to it, he should have computed the amount allowable as deduction under s. 37 (3) r/w r. 6d by multiplying the per day rates specified in r. 6d with the total number of days spent during the year in travelling. The assessee, therefore, appealed to the CIT (A ). The case of the assessee before the CIT (A) was that the disallowance under r. 6d should be worked out by taking into consideration all the trips undertaken by the employee during the year together and not on the basis of each trip. The CIT accepted this contention of the assessee and directed the ITO to recompute the disallowance accordingly. The appeal of the Revenue against the above order having been dismissed by the Tribunal, the Revenue is before us for our opinion with this reference from the Tribunal under s. 256 (1) of the Act.

(3.) WE have heard Dr. V. Balasubramanian, the learned counsel for the Revenue. We have also heard Mr. Arun Sathe, the learned counsel for the assessee. We have perused the order of the Tribunal in this case, as also its earlier order in ITA Nos. 706 and 707 (Bombay) of 1975-76 (M/s Blackie and Sons (India) Ltd. , Bombay vs. ITO) and order dt. 1st February. , 1983 in S. V. Ghatalia vs. Second ITO (1983) 37 CTR (Trib) (Bom) 68 : (1983) 4 ITD 583 (Bom) which were followed by the Tribunal. We have perused sub-s. (3) of s. 37 of the Act which imposes a ceiling on the allowable deduction of expenditure incurred under the heads specified therein including expenditure in connection with travelling by the employees. Sub-s. (3) of s. 37 reads as follows :