Law:

Section:

Section 40(a)(v) of the Income-tax Act, 1961 - Business disallowance - Expenditure incurred on providing benefits to employees - Assessment year 1971-72 - Whether expenditure incurred by assessee-company on repairs and maintenance of bungalow provided to its employee, was to be excluded for purpose of computing disallowance under section 40(a)(v) - Held, yes FACT The ITO held that the expenditure incurred by the company for maintaining bungalows which were in fact used by the employees, was disallowable under section 40(a)( v). The Tribunal allowed the assessee's appeal holding that the expenses incurred on repairs and maintenance of such bungalows could not be considered as a perquisite. On reference: HELD The latter part of section 40(a )(v) cannot apply to the repair and maintenance of such bungalow when the rent-free accommodation or the accommodation at a concessional rate is treated as a perquisite by the earlier part. Moreover, when a company is maintaining the bungalow in good livable condition, the company incurs the expenditure in question for repairs of its own property. Unless there is evidence that the repair increased the value of the bungalow and the flats, such expenditure cannot be coming within the ambit of the latter part of section 40(a )(v). It cannot be the intention of the Legislature to bring within the sweep of the latter part of section 40(a)(v ) expenditure or allowance in respect of an asset belonging to the assessee and used by such employees when the rent-free accommodation or the accommodation at a concessional rate is itself treated as a perquisite. The principles governing construction of section 40(c )(iii) will equally apply to the construction of section 40(a)(v ). Therefore, the Tribunal was right in holding that expenses for maintaining the bungalows should be excluded for purpose of computing disallowance under section 40(a)(v ). II. Section 80-I of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings etc. after certain dates - Assessment year 1971-72 - Assessee company was engaged in business of production, transportation and sale of crude oil - It had constructed its own pipeline - It…

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