Commissioner of Income Tax vs Shivalik Drug (Family Trust)

This is an Income Tax reference at the instance of the CIT. The Tribunal, Delhi Bench-B, New Delhi has referred the following question to this Court for its opinion:

Whether, the Tribunal is right in holding that amounts paid by way of travelling allowance to the trustees by the assessee trust would not be subject to the provisions of Rule 6D of the IT Rules ?

The dispute relates to the asst. yr. 1982-83. The assessee is a family trust deriving income from manufacture and sale of allopathic and ayurvedic medicines. During the relevant assessment year, it claimed deduction of Rs. 17,824 (sic) as travelling allowance expenses. The ITO found that the travelling allowance claimed by the assessee was excessive. He invoked Rule 6D of the IT Rules and held that travelling allowance as per the aforesaid Rule 6D was admissible to the extent of Rs. 29,965. However, in the first appeal as well as in the second appeal, it has been held that Rule 6D of the rules has no application to the facts of the present case.

Heard Shri R.K. Upadhyaya, learned standing counsel for the parties and Shri Shubham Agarwal, learned Counsel for the assessee and respondent. It was contended by learned Counsel for the Department that phrase "any other person" clause in Sub-rule (2) to Rule 6D is wide enough to include even the assessee also. He submits that in view of the said phrase, the Rule 6D(2) is already attracted.

Shri Shubham Agarwal, on the other hand submits that on a true and correct interpretation, the phrase "any other person" will include only such persons, who are akin to "an employee".

Considered respective submissions of the learned Counsel for the parties.

The question whether a restricted meaning to the words, as suggested by the assessee to ''any other person'' should be given is the sole point mooted in the present case. In other words, doctrine of ''ejusdem generis'' can be invoked as these words are general in nature and followed by the word ''employee''? The true scope of the rule of ''ejusdem generis'' is that words of general nature following specific and particular words should be construed as limited to things which are of the same nature as those specified.

When particular words pertaining to a class category or genus are followed by general words, the general words are construed as limited to the things of the same points as those specified.

In State of Karnataka and Others Vs. Kempaiah, while interpreting the words ''in any other manner'' it was held these words "contains general words which construed literally should receive their full and natural meaning but when they follow specific and particular words of the same genus, it will be presumed that the legislature has used the general words in a limited sense to convey the meaning implied by specific and particular words. This follows from application of rule of ''ejusdem generis''."

In Kamlesh Kumar Sharma Vs. Yogesh Kumar Gupta and others, while interpreting the word ''otherwise'' in group of words ''death and resignation'' with regard to the question of vacancy, held that the word ''otherwise'' has to be read as ''ejusdem generis'', that is to say, in group similar to death, resignation, long leave vacancy, invalidation, person not joining after being duly selected. Wide and liberal interpretation cannot be given to word ''otherwise''.

This Court in Commissioner of Income Tax Vs. Modipon Limited (No. 1), has held that Rule 6D does not apply to a foreign technician, who is not an employee of the assessee. This judgment apparently supports the contention of the learned Counsel for the assessee. It was brought to our notice that similar view has been taken by the Delhi High Court in Commissioner of Income Tax Vs. Modipon Ltd. (No. 1), The first appellate authority has interpreted Rule 6D(2) and invoked the doctrine of ''ejusdem generis''.

We agree that the phrase ''any other person'' would draw its colour from the preceding word namely, ''employee''. In the case on hand, it cannot be said that the assessee was ''an employee'' or akin to an employee.

In this view of the matter, we answer the question in the affirmative, i.e., in favour of the assessee and against the Department.

No order as to costs.