Law: Income Tax Act, 1961

Section: 37(3)

Income-tax-----Business expenditure---Expenditure incurred on travelling by employee--¬Limits on expenditure---Disallowance limited to expenditure incurred for stay in hotels and confined to daily allowances---Disallowance does not extend to any other expenditure provided it is wholly laid out for purposes of business--¬Indian Income Tax Act, 1961, S.37(3)---Indian Income Tax Act Rules, 1962, R.6-D. Rule 6-D of the Indian Income Tax Rules, 1962, read with section 37(3) of the Income Tax Act, 1961, limits the expenditure incurred on travelling to the extent of stay in hotels confining it to daily allowances referred to in Rule 6-D and does not extend to any other expenditure incurred provided the expenditure is wholly and exclusively laid out for the purposes of business. JUDGMENT AJIT K. SENGUPTA, J.---This reference under section 256(1) of the Income Tax Act, 1961, relates to the assessment year 1980-81, on the interpretation of Rule 6-D(2)(b) of the Income Tax Rules, 1962. The Income Tax Officer disallowed Rs.21,693 as against Rs.15,978 offered by the assessee on the ground that, under the Rule 6-D(2)(b), incidental conveyance expenses incurred (after reaching the destination), would be taken into consideration while making this disallowance. On appeal, the Commissioner of Income-tax (Appeals) deleted both the disallowances. On further appeal, the Tribunal held the deletion of the disallowance of Rs.5,985 on account of travelling expenses on the ground that Rule 6-D read with section 37(3) seeks to limit the expenditure incurred on travelling to the extent of stay in hotels confining it to daily allowance referred to in Rule 6-D and dc not extend to any other expenditure incurred provided that expenditure was for the purpose of business. On these facts, the following question of law has been referred to this Court: "Whether, on a correct interpretation of rule 6-D(2)(b) of the Income Tax Rules, 1962, the Tribunal was justified in restricting the disallowance under the said Rule to Rs.15,979 instead of Rs.21,963 as calculated by the Income Tax Officer?" At the hearing, it has been contended by learned counsel appearing for the Revenue that the Income Tax…

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