1992 (5) TMI 67

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....ce. 10. Before the CIT (Appeals), the assessee did not challenge the disallowance and all that was contended, was that the same be included for computing the disallowance under section 37(3A). This argument was rejected by the CIT(A) on the ground that since the expenditure was in the nature of ' entertainment ', the same was required to be specifically dealt with under section 37(2A) and not 37(3A). 11. Even before us, similar arguments as advanced before the CIT (Appeals) were tendered. According to the learned counsel, a sum of Rs. 63,059 out of the total expenditure related to payment to hotels and these were required to be considered under section 37(3A) and (3B). As regards the balance, it was conceded that these could be consid....

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..... Ground No. 4 pertains to the question, whether a sum of Rs. 3,06,894 paid as conveyance allowance to the employees falls within the mischief of section 37(3A) and (3B). The AO was of the view that the amount in question was to be included for the purposes of making the disallowance under section 37(3A). 14. Before the CIT(A), it was contended that conveyance allowance paid to employees was not hit by section 37(3A) & (3B). According to the assessee, the same formed part of the salary of the employees and was not covered by the aforesaid provisions. The CIT(A) took note of Explanation (b) whereby it was provided that expenditure on advertisement, publicity and sales promotion would not include remuneration paid to the employees of the a....

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....ly referred to the conveyance allowance paid to the employees and in the case of a company to the Directors and no distinction was to be drawn between those persons who were maintaining cars and those who were maintaining scooters or no vehicle at all. 17. After examining the rival submissions, we are of the view that there is merit in the arguments advanced by the learned counsel of the assessee. As rightly contended by him, the idea behind introducing section 37(3A) to (3D) was to curb the lavish and wasteful expenditure incurred by assessees under various heads including the maintenance of motor cars, etc. In our opinion, conveyance allowance paid to those employees who are maintaining motor cars is required to be added in working out....