1980 (7) TMI 86

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....bonus in cash cannot be disallowed in part or in full applying the provisions of section 40(a)(v) of the Income-tax Act, 1961 ? " The question referred in the third case is as follows : " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in holding that payment of house rent allowance in cash cannot be disallowed in part or in full applying the provisions of section 40A(5) of the Income-tax Act, 1961 ? " These matters relate to the assessment for the assessment years 1970-71, 1971-72 and 1972-73. In the first two years, payments had been made by way of bonus to two officers, namely, K. V. Parekh and Subba Rao. The ITO was of the opinion that this constituted perquisite and, therefore, took ....

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....poses of s. 40A(5) and cl. (a) of the Explanation, inter alia, states that the definition of salary as given in s. 17 is assigned with modification that the word " perquisite " occurring in sub-cl. (iv) and the whole of sub-cl. (vii) shall be omitted. Perquisite " is defined under cl. (b) of the Explanation as follows: " 'Perquisite' means (i) rent-free accommodation provided to the employee by the assessee ; (ii) any concession in the matter of rent respecting any accommodation provided to the employee by the assessee; (iii) any benefit or amenity granted or provided free of cost or at concessional rate to the employee by the assessee; (iv) payment by the assessee of any sum in respect of any obligation which, but for such paym....

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....the affirmative. The matter in relation to the other two cases depends upon the interpretation to be placed on s. 40(a)(v) as it existed prior to April 1, 1972. It reads as follows: " Any expenditure which results directly or indirectly in the provision of any benefit or amenity or perquisite, whether convertible into money or not, to an employee. Explanation 2.-In this sub-clause, the word 'salary' shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule." The payment by way of bonus to the two employees was not considered as part of salary and we think rightly. The ITO, however, treated it as a perquisite. The AAC and the Tribunal held that it is a cash payment and could not be considered ....