TaxTMI 
TaxTMI 
2003 (3) TMI 68
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..... In the present case, there is no evidence on record to indicate the nature of the Government securities. There are dated Government securities and there are securities which are not dated. In the present case, no material is placed before us regarding the type of Government securities. In the circumstances, we cannot apply the ratio of the judgment of this court in the case of American Express International Banking Corporation v. CIT [2002] 258 ITR 601, as contended by the Department. In the circumstances, we do not see any reason to distinguish the facts of this case from the facts in the case of Citibank v. CIT decided on June 10, 1998, vide Income-tax Reference No. 197 of 1984. Accordingly, we answer both the above questions, on the facts of this case, in the affirmative, i.e., in favour of the assessee and against the Department. At the instance of the Revenue, the following four questions have been referred to us by the Tribunal for our opinion. The said questions are as follows: "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the expenditure incurred on repairs and maintenance of flats owned by the asse....
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....t of section 40A(5)(a)(ii). He contradistinguished the second part with the first part, which applies only if the expenditure results in any perquisite to the employee. On the other hand, Mr. Mistry learned counsel appearing on behalf of the assessee, argued that section 40A(5)(a)(ii) is in three parts. That, it refers to expenditure which results in perquisites to the employee; that it also refers to expenditure incurred by the assessee on its assets and lastly, it refers to allowances in respect of the assets owned by the assessee, but used by the employee for his own purposes or benefit. He contended, therefore, that section 40A(5)(a)(ii) refers to three items, viz., perquisites, expenditure on the assets of the employer-assessee and allowances in respect of the assets. He, however, contended that question No. (1) expressly refers only to perquisite and not to expenditure on the assets. He further contended that similarly question No. (2) quoted hereinabove refers to payment of ground rent, taxes and society charges in respect of the premises owned by the assessee and, therefore, he contended that each question needs to be separately answered and each question needs to be ans....
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....ure, which results in the provision of any perquisite to an employee or incurs any expenditure in respect of any assets of the assessee used by the employee for his own benefit, then So much of such expenditure, as is in excess of the limit specified, shall not be allowed as a deduction. If one reads section 40A(5)(a)(ii), the emphasis is on the word "expenditure". There could be expenditure which results in providing perquisite to an employee, there could also be an expenditure in respect of any assets of the assessee used by an employee for his own benefit. Sub-section (5) was inserted in section 40A by the Finance (No. 2) Act, 1971, with effect from April 1, 1972. It imposes a limit on deductible amount of expenditure, which is incurred in respect of an asset let out to an employee or which is incurred by way of perquisite to the employee. Therefore, if one keeps the underlying object in mind, it is evident that section 40A(5)(a)(ii) controls the expenditure on the asset, which is used by the employee for his own benefit. This is also clear from the first proviso lo section 40A(5)(a), where a ceiling is imposed on the expenditure in respect of an asset used by the employee fo....
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....tances, the Department is wrong in putting that cap on the total expense. This is the basic controversy in this case. Findings on questions Nos. (3) and (4) raised by the Department: Questions Nos. (3) and (4) deal with a common topic of interpretation of section 20(1)(i), as it stood at the relevant time. For the sake of convenience, section 20(1)(i) is quoted hereinbelow: "20. Deductions from interest on securities in the case of Banking company.-(1) In the case of a banking company- (i) the sum to be regarded as a sum reasonably expended for the purpose referred to in clause (i) of section 19 shall be an amount bearing to the aggregate of its expenses as are admissible under the provisions of sections 30, 31, 36 and 37 (other than clauses (iii), (vi), (vii) and (viia) of sub-section (1) of section 36) the same proportion as the gross receipts from interest on securities (inclusive of tax deducted at source) chargeable to income-tax under section 18 bear to the gross receipts of the company from all sources which are included in the profit and loss account of the company;" In this case, we are concerned with the assessment year 1981-82. This section has been omitte....