Cash motor car allowance and automobile ancillary manufacture were both recognised for tax relief under the relevant statutory provisions.

Cash motor car allowance was treated as a perquisite within the statutory ceiling under section 40(c)(iii), with the mode of payment not altering its character, and the issue was resolved in the assessee's favour. The court also accepted that manufacture of automobile ancillaries brought the company within the specific rebate entry in Part III of the Finance Act, 1965 Schedule, so the corporate tax rebate was available. Both referred questions were thus answered against the Revenue and for the assessee, with no order as to costs.

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Issues: (i) Whether motor car allowance paid in cash was a perquisite within the meaning of section 40(c)(iii) of the Income-tax Act, 1961 and therefore subject to the ceiling therein. (ii) Whether the assessee-company was a manufacturer of automobile ancillaries and hence entitled to rebate of 35% on corporate tax under item 21 of Part III of the Schedule to the Finance Act, 1965.

Issue (i): Whether motor car allowance paid in cash was a perquisite within the meaning of section 40(c)(iii) of the Income-tax Act, 1961 and therefore subject to the ceiling therein.

Analysis: The question stood governed by the settled view that a cash allowance of this nature fell within the ambit of the statutory expression used in section 40(c)(iii), and the mode of payment did not exclude its character as a perquisite for the purpose of the ceiling.

Conclusion: The issue was answered in the negative, against the Revenue and in favour of the assessee.

Issue (ii): Whether the assessee-company was a manufacturer of automobile ancillaries and hence entitled to rebate of 35% on corporate tax under item 21 of Part III of the Schedule to the Finance Act, 1965.

Analysis: The relevant entry in Part III of the Schedule to the Finance Act, 1965 specifically covered automobile ancillaries, and the finding that the assessee manufactured such articles brought it within the benefit of the prescribed rebate.

Conclusion: The issue was answered in the negative, against the Revenue and in favour of the assessee.

Final Conclusion: Both referred questions were decided in favour of the assessee, with no order as to costs.

Ratio Decidendi: A cash allowance may constitute a perquisite for the purpose of the statutory ceiling under section 40(c)(iii), and where the assessee's product falls squarely within a schedule entry, the corresponding tax rebate must be granted.

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