Commissioner of Income Tax vs General Marketing and Manufacturing Co.

Sabyasachi Mukharji, J.—In this reference u/s 256(1) of the income tax Act, 1961 (''the Act'') the following question has been referred to this Court: Whether, on the facts and circumstances of the case, and on a proper interpretation of section 40(c)(iii) /40(a)(v) of the income tax Act, 1961, the Tribunal was right in holding that the cash payments made by the assessee to its employees to reimburse them for the expenses incurred by way of house rent, medical expenses and salaries of gardeners and watch and ward employees in the relevant previous years did not result in the provision of any benefit, amenity or perquisite and should not, there-fore, be taken into account in computing the disallowances to be made under the said section 40(c)(iii) /40(a)(v) ?

In view of the facts found by the Tribunal and in view of the principles laid down by the Division Bench of this Court in the case of Commissioner of Income Tax Vs. Kanan Devan Hills Produce Company Ltd., , principles of which decision have been followed by the Karnataka High Court in the case of Commissioner of Income Tax Vs. Mysore Commercial Union Ltd., and the Madras High Court in the case of Commissioner of Income Tax, Tamil Nadu-V Vs. Manjushree Plantations Ltd., and the Bombay High Court in the case of Commissioner of Income Tax, Bombay City-II Vs. Indokem Private Ltd., , though a contrary decision has been taken by the Full Bench of the Kerala High Court in the case of Commissioner of Income Tax Vs. Commonwealth Trust Ltd., , we must answer the question in the affirmative and in favour of the assessee.

Incidentally, we may refer to the decision in the special leave application from the order of the Bombay High Court being SLP No. 2970 of 1976 in IT Appeal No. 113 of 1976 of the Bombay High Court which was dismissed by the Supreme Court by an order dated 4-4-1975.

The question is, therefore, answered in the affirmative and in favour of the assessee. There will be no order as to costs.

Suhas Chandra Sen, J.

I agree.