COMMISSIONER OF INCOME TAX Vs. BRITANNIA INDUSTRIES LTD

JUDGEMENT

(1.) In this reference under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1977-78, the following question of law has been referred to this court :

(2.) The facts relating to this reference are that the assessee sold seven of its old cars to its employees at more or less the written down value of such cars. The said cars were purchased during the period 1967 to 1971. The Income-tax Officer took the view that the fair market value at which the said cars could be sold was much higher and he was of the view that the fair market value at which the said cars could be sold was Rs. 77,500. Deducting therefrom the purchase price of Rs. 33,740, the Income-tax Officer treated the difference of Rs. 43,760 as perquisite for the purposes of determining the limits under Section 40A(5) of the Income-tax Act, 1961.

(3.) The Commissioner of Income-tax (Appeals), however, was of the view that the inclusion of the said amount under Section 40A(5) of the Act was not permissible under the Act as there was no expenditure incurred in the said case during the relevant year. In other words, the company did not incur any expenditure, directly or indirectly, in providing any perquisite to the employees.