Cash allowances to employees were held outside section 40(c)(iii), allowing the related tax deductions.

Cash allowances paid directly to employees, including overseas allowance, managing allowance, devaluation allowance and transport allowance, were held not to fall within the expressions "benefit", "amenity" or "perquisite" in section 40(c)(iii) of the Income-tax Act, 1961. The court construed the provision as aimed at benefits or amenities in kind, or payments made to discharge an employee's obligation, and treated the words "whether convertible into money or not" as supporting exclusion of direct cash payments. The claimed deductions were therefore allowable.

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Issues: Whether cash allowances paid directly to employees, including overseas allowance, managing allowance, devaluation allowance and transport allowance, fell within the expressions "benefit", "amenity" or "perquisite" in section 40(c)(iii) of the Income-tax Act, 1961.

Analysis: The relevant provision disallowed expenditure resulting directly or indirectly in the provision of any benefit, amenity or perquisite to an employee, but the wording and structure of the amended clause showed that the legislature was concerned with benefits or amenities in kind or with payments made to discharge an employee's obligation, not with direct cash allowances paid to the employee. The phrase "whether convertible into money or not" was treated as governing the entire series of expressions and supported a construction that excluded direct cash payments. The proviso and the retained distinction between "remuneration" in one part of section 40 and its omission from clause (iii) reinforced that interpretation.

Conclusion: Cash allowances paid directly to the employees did not fall within section 40(c)(iii), and the claimed deductions were allowable.

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