1992 (11) TMI 22

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....s business and reimbursed to them as such, was hit by section 37(3A)/(3B) of the Income-tax Act, 1961 ?" This reference relates to the income-tax assessment of the assessee-company for the previous year ending October 31, 1983, corresponding to the assessment year 1984-85. The assessee-company derives income from manufacture and sale of printing inks and synthetic resins. The assessee-company reimburses the expenses incurred by its employees for using their own motor cars for the purpose of the business carried on by the assessee-company. The aggregate reimbursement made during the relevant previous year on account of expenses incurred by the assessee-company's employees for use of their own motor cars was Rs. 5,49,917. The Income-tax Of....

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....enses in the hands of the assessee as the employer will be expenses on running and maintenance of motor cars, it being immaterial to whom the motor cars belong. Even though the employees own and maintain and run the motor cars and the employer only reimburses the expenditure on such maintenance, the employer, i.e., the assessee, by virtue of reimbursement, accepts the expenditure not as the expenditure of the employees but expenditure of its own. For the proposition that reimbursement of the actual expenses incurred by an employee for travelling wholly necessarily and exclusively for the purpose of business of the employer is not part of the salary, reliance was placed on the decision in Pook v. Owen [1969] 45 TC 571 (HL). It is, however....

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....pplies only where the terms of the law are ambiguous or vague. But, in our view, in the context of the provisions of section 37(3A)/(3B) the said rule of construction has little relevance. Here, we have a non obstante provision which limits the original ambit of section 37(1)to the extent stated in those new sub-sections. The sub-sections are quite clear that they intend to have a limiting effect on the allowability of residuary business expenditure. The subject of limitation is, inter alia, the expenditure on the running and maintenance of motor cars. The Explanation below the sub-section leaves no doubt that even the conveyance allowance given by way of compensation to the employees for expenditure incurred by them in performing the dutie....