COMMISSIONER OF INCOME TAX Vs. OSWAL WOOLLEN MILLS

JUDGEMENT

(1.) THE following questions of law have been referred for the opinion of this Court by the Income -tax Appellate Tribunal, and 631/Chd/1989, for the asst. yr. 1985 -86: "Whether, on the facts and in the circumstances of the case and on a proper interpretation of s. 37(3A/3B), the Tribunal was right in law in holding that the driver's salary was not to be included while working out the disallowance under s. 37 (3A) of the IT Act, 1961 ? RA No. 293

(2.) THE AO disallowed the claim for deduction to the extent of 20 per cent, in respect of the drivers' salary in view of the provisions of s. 37(3B) of the IT Act, 1961 (for short, "the Act"), which disallowed the expenditure on car maintenance. The Tribunal reversed the said view on the ground that the said expenditure was covered by s. 37(1) of the Act and could not be treated as expenditure incurred on running and maintenance of motor cars for purposes of s. 37(3B) of the Act.

(3.) THE assessee claimed deduction in respect of payment towards leave with wages/salary by treating the same as liability during the year which was disallowed on the ground that the liability was not ascertained one. The appellate authority accepted the claim of the assessee on the ground that it was following the mercantile system of accounting. This view was affirmed by the Tribunal following the earlier assessment years i.e., 1983 -84 and 1984 -85.