1980 (7) TMI 86 - HC - Income Tax

High Court affirms Appellate Tribunal decisions on cash payments for bonus & rent not taxable perquisites

The High Court of Karnataka upheld the decisions of the Appellate Tribunal regarding the non-consideration of cash payments of bonus and house rent ... Income From Business Issues involved: Interpretation of provisions of section 40(a)(v) and section 40A(5) of the Income-tax Act, 1961 regarding the disallowance of payment of bonus in cash and house rent allowance in cash as perquisites.Interpretation of section 40A(5) - House Rent Allowance (HRA):The case involved assessment years 1970-71, 1971-72, and 1972-73 where cash payments were made as bonus and house rent allowance. The Income Tax Officer (ITO) considered these payments as perquisites, but the Appellate Tribunal and the Commissioner disagreed. Regarding the house rent allowance in 1972-73, it was found that the payment did not fall within the definition of 'perquisite' under section 40A(5) as it was a cash payment and did not meet the criteria outlined in the Explanation 2 of the Act. The Tribunal correctly held that the house rent allowance in cash was not a perquisite and thus should not be restricted to 1/5th of the salary. The question in this regard was answered in the affirmative.Interpretation of section 40(a)(v) - Payment of Bonus:The interpretation of section 40(a)(v) u/s the payment of bonus as a perquisite was also examined. The ITO treated the bonus payments as perquisites, but the Appellate Tribunal disagreed, stating that a cash payment like a bonus does not fall under the definition of a perquisite. The absence of a separate definition of 'perquisite' for this section led to a detailed analysis. The provision of s. 40(a)(v) implies that a perquisite should be something apart from money, convertible into money or not. As cash payments do not align with this definition, the Tribunal's decision that bonus payments were not perquisites and should not be restricted to 1/5th of the salary was upheld. The questions in the first two references were answered in the affirmative and in favor of the assessee.Conclusion:The High Court of Karnataka upheld the decisions of the Appellate Tribunal regarding the non-consideration of cash payments of bonus and house rent allowance as perquisites under sections 40(a)(v) and 40A(5) respectively. The court emphasized the distinction between cash payments and other forms of benefits or amenities that qualify as perquisites under the Income-tax Act, 1961.