1993 (9) TMI 92 - HC - Income Tax

Court rules depreciation on certain assets must be included in employee perquisites calculation

The High Court of Bombay ruled in favor of the Revenue in a case concerning the interpretation of section 40A(5)(a)(ii) of the Income-tax Act, 1961. The ... Perquisite Issues:- Interpretation of section 40A(5)(a)(ii) of the Income-tax Act, 1961 regarding the inclusion of depreciation on furniture, flat, air-conditioners, and refrigerators in the computation of perquisites for employees.Detailed Analysis:The High Court of Bombay was tasked with deciding on the interpretation of section 40A(5)(a)(ii) of the Income-tax Act, 1961 in a case involving the computation of perquisites for an employee. The case revolved around whether depreciation on assets like furniture, flat, air-conditioners, and refrigerators should be considered when determining the value of perquisites provided to an employee. The Tribunal had initially excluded the depreciation amount from the calculation, leading to a lower value of perquisites. The Revenue challenged this decision, arguing that depreciation should be included in the computation.Upon examining the relevant provisions of the Income-tax Act, the Court noted that section 40A(5)(a)(ii) pertains to expenditures resulting in the provision of perquisites to employees. The Court emphasized the term 'allowance' used in the provision, indicating that depreciation should be considered as an allowance in respect of assets used by the employee. Drawing parallels with a previous decision, the Court highlighted that depreciation falls within the ambit of section 40A(5)(a)(ii) and should be subject to the specified limits.The Court rejected the argument made by the assessee's counsel, who attempted to distinguish between different sections of the Act to exclude depreciation from the calculation of perquisites. By comparing the language of relevant provisions, the Court found no substantial difference that would warrant deviating from the established interpretation. Additionally, reference was made to a Supreme Court decision emphasizing the similarity between provisions related to depreciation in the Act.In conclusion, the High Court ruled in favor of the Revenue, directing the Tribunal to modify its order to include depreciation in the computation of perquisites. The Court emphasized that depreciation on assets like furniture, flat, air-conditioners, and refrigerators should be considered as an allowance under section 40A(5)(a)(ii) when determining the value of perquisites for employees. The reference was disposed of accordingly, with the decision rendered in favor of the Revenue.