Law:

Section:

Section 40(c)(iii) of the Income-tax Act, 1961 - Business disallowance - Remuneration etc. paid in excess of prescribed limit in case of company etc. - Assessee company took some flats on lease which were occupied by its employees - It incurred expenditure on repairs, etc. of flats to maintain said flats in good livable condition - Whether expenditure incurred on repairs did not result in providing any benefits, amenity or perquisites to employees within meaning of section 40(c)(iii), and, therefore, it could not be disallowed - Held, yes FACTS The employees of the assessee-company were occupying the flats which were taken by the assessee-company on lease. The company incurred certain expenditure on the maintenance, repairs, etc. with respect to those flats. The ITO disallowed said expenditure on the ground that it represented benefit given to the assessee's (employees) and were expenses which otherwise would have been payable by the employees. The Tribunal held the said expenditure could not be treated as benefit, amenity or perquisites to the employees within the meaning of section 40(c)(iii ) as the company had to undertake the repairs in the normal course. It, therefore, allowed the claim. On reference: HELD There was no evidence that the repairs increased the value of the flats. The company had to maintain the flats in good condition and the expenditure for repairs was undertaken to discharge that obligation. In the circumstances, it could not be said that this expenditure conferred any benefit, amenity or perquisite to the employees within the meaning of section 40(c)(iii ). Hence, the same could not be disallowed under section 40(c )(iii). Note: The decision was in favour of the assessee. M.M. Dhar for the Applicant. Dr. Debi Pal and Miss Manisha Seal for the Respondent. JUDGMENT Satish Chandra, CJ.-For the assessment year 1968-69, the Tribunal has referred the following question of law for our opinion: "Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in holding that repairs to the flat occupied by the employees did not provide any benefit or amenity to the employees as contemplated under the provisions of section…

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