Law:

Section:

section 40(c)(iii ) [as it stood prior to 1-4-1969], read with section 40(a)( v) [as it stood prior to 1-4-1972], of the income-tax act, 1961-business disal lowance-expenditure by way of perquisite to employees-whether provisions of section 40(c)( iii) and section 40(a)( v) apply to bonus paid in cash to employees-held, no Facts The assessee-company paid bonus in cash to its employees drawing salary in excess of the statutory limit of Rs. 1,600 per month. This was disallowed under section 40(c)( iii). On reference : Held The provisions of section 40(c )(iii ) and section 40(a)(v ) do not apply to allowances paid in cash to employees, as there is no question of convertibility into money where cash is paid. Accordingly, in the instant case, no part of the bon us paid to the employees in cash could be disallowed under section 40(c)(iii ). Case review CIT v. Warner Hindustan Ltd. [1984] 145 ITR 24 (AP) followed. Case referred to: CIT v. Singareni Collieries Co. Ltd. [1980] 121 ITR 466 (AP) and CIT v. Warner Hindustan Ltd. [1984] 145 ITR 24 (AP). REFERRED CASE NO. 141 OF 1978. M.S.N. Murthy for the Applicant. A. Satyanarayana Rao for the Respondent. JUDGMENT ANJANEYULU, J. - The following two questions of law are referred to this Court under section 256(1) of the Income-tax Act, 1961 ('the Act') : "1. Whether, on the facts and in the circumstances of the case, the assessee was entitled to deduct the sum of Rs. 44,582 and Rs. 7,682 as revenue expenditure for the assessment years 1966-67 and 1970-71, respectively ? 2. Whether, on the facts and in the circumstances of the case, a part of the bonus payment made by the assessee-company to its employees could be disallowed under section 40(c)( iii) of the Income-tax Act, 1961 for the assessment year…

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