Law:

Section:

section 40(c)( iii) of the income-tax act, 1961 [as it stood before 1-4-1969]-payments not deductible-limits on deduction in respect of salary, perquisite, etc., in case of companies-assessee-company paid to some of its employees overseas allowance, manufacturing allowance, devaluation allowance and transport allowance and claimed the same as a deduction-whether these allowances represented any benefit or amenity or perquisite within the meaning of section 40(c )(iii)-held, no-whether the word "benefit" in legal parlance included cash benefits as well as benefits in kind-held, no Facts The assessee-company was carrying on business in cultivation, manufacture and sale of tea. During the accounting years relevant for the assessment years 1966-67 and 1967-68, the assessee-company paid to some of its employees overseas allowance, manufacturing allowance, devaluation allowance and transport allowance and claimed the same as a business deduction. The assessee contended that these allowances did not represent any benefit or amenity or perquisite within the meaning of sub-clause (iii ) of clause (c) of section 40 and were fully deductible. The ITO rejected the claim and added back 40 per cent of the amounts claimed. The AAC accepted the contention of the assessee and held that the allowances paid in cash directly to the employees did not come within the ambit of expression "benefit or amenity or perquisite" as appearing in the said section. The AAC accordingly allowed the claim. The Tribunal upheld the AAC's order. On reference the Revenue contended that in legal parlance, the word "benefit" commonly included cash benefits as well as benefits in kind and, therefore, both the AAC and the Tribunal were not justified in reversing the order of the ITO : Held 1. In their ordinary meaning, the words "which results directly or indirectly in the provision of any benefit, amenity or perquisite, whether convertible into money or not, "occurr-ing in section 40(c)(iii), exclude cash paid directly to an employee as there is no ques-tion of convertibility to money where cash would be paid. Cash payments, which section 40(c)(iii) con-templates, are sums paid by the company in respect…

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