TaxTMI 
TaxTMI 
2011 (12) TMI 298
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....etermination:- "1. Whether on the facts and in circumstances of the case, the Tribunal is right in law in holding that the expenditure of Rs. 8,98,587/- incurred by the appellant company in reimbursing its employees for expenses on public taxis in connection with the business of the company, is of the nature of payment of conveyance allowance, thereby attracting the disallowance provided for in section 37(3A) of the I.T. Act, 1961? 2. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the assessee company is not entitled to depreciation allowance in respect of the 11th and 12th Floors of Hansalaya Building, 15, Barakhamba Road, New Delhi?" Question No. 1 2. It ....
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....d in computing the income chargeable under the head 'Profits and gains of business or profession'. Now let us turn to section 37(3B) which reads as follows: "(3B) The expenditure referred to in sub-section (3A) is that incurred on- (i) advertisement, publicity and sales promotion or (ii) running and maintenance of aircraft and motor cars or (iii) payments made to hotels." In the present reference we are concerned with clause (ii) of section 37(3B) of the Act inasmuch as it refers to expenditure incurred on "running and maintenance of," inter alia, "motor cars". The Explanation after section 37(3B), so much as is relevant, reads as under:- "Explanation.- For the purposes of sub-sections (3A) and (....
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....t clear that the expression "expenditure on running and maintenance of motor cars" shall include expenditure on hire charges for engaging cars plying for hire and conveyance allowance paid to the employees and to the directors, where the assessee is a company. 4. Keeping these provisions in mind, let us examine as to whether the expenditure incurred on public taxis/metered taxis can be included in the expression "expenditure on running and maintenance of motor cars." Clause (ii) of Section 37(3B) refers to expenditure incurred on 'running and maintenance of aircraft and motor cars'. Taxi fare paid for travel in a public taxi cannot, by any stretch of imagination, mean expenditure on 'running and maintenance of ...motor cars'....
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.... has incurred expenses on hiring taxis (yellow taxis). Therefore, section 37(3B) has no application to the facts of the present case." 6. The learned counsel for the revenue invited our attention to a decision of the High Court of Karnataka in Karnataka State Financial Corpn. v. CIT [2000] 242 ITR 623/123 Taxman 201 (Kar.). However, that case is distinguishable from the present case. In that decision the question was whether the "conveyance allowance" which was paid to the employees who owned two wheelers, would be expenditure of the type referred to in section 37(3B)? The nature of expenditure was conveyance allowance paid to the employees. That falls within sub-clause (ii) of clause (c) of the said Explanation. In the present case, we ar....
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....taxis would not at all come within the purview of section 37(3A) read with sub-section (3B). The said court held:- "In our view, Explanation (c) given in clause (ii) of section 37(3B) of the Act cannot be brought into action in a case of metered taxis because it is neither an expenditure incurred on hire charges for engaging cars plying for hire nor it was a conveyance allowance paid to employees. It is an expenditure incurred for travelling in a metered taxi which is a totally different concept altogether." It is clear that the Calcutta High Court was of the view that an expenditure on metered taxis or public taxis was not an expenditure of the nature referred to in section 37(3B) and, therefore, no disallowance could be made under secti....
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....said Act. Consequently, question no. 1 is answered in the negative and in favour of the assessee. Question No. 2 9. Insofar as question no. 2 is concerned, the same stands covered in favour of the assessee on account of the decision of the Supreme Court in the assessee's own case pertaining to the Assessment Year 1982-83 entitled Dalmia Cement (Bharat) Ltd v. CIT [2001] 247 ITR 267 where the Supreme Court ordered as under:- "The question that this court is called upon to answer in this reference at the behest of the assessee reads thus: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the assessee-company is not entitled to depreciation allowance in respect of eleven....