K. Gnanaprakasam, J. - (1.) SUNDARAM Finance Limited, is the assessee at whose instance three questions have been referred to this court. "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding, (i) that medical reimbursement, house rent allowance, personal accident insurance and club fees should be treated as part of salary for working out the disallowance under Section 40A(5) for the assessment years 1983-84 and 1984-85 ? (ii) that travelling allowance considered to be in excess of the limits under Rule 6D of the Income-tax Rules is not liable as deduction for the assessment years 1983-84 and 1984-85 ? (iii) and upholding the disallowance of depreciation amounting to Rs. 4,40,029 for the assessment year 1983-84 ?"
(2.) AS far as the expenditure in the first question, viz., medical reimbursement and house rent allowance are concerned, they have got to be treated as part of salary and the assessee cannot have exemption under Section 40A(5) of the Income-tax Act, 1961. In fact, this question has already been answered by this court in Sunda0ram Clayton Ltd. v. CIT [1999] 239 ITR 416. In that case also the question of medical reimbursement and house rent allowance came up for consideration before this court and it was held that the cash payment like house rent allowance and medical reimbursement paid to the employees should be treated as salary for the purposes of determining the ceiling under Section 40A of the Act. The very same question is involved in this case also. Therefore, as far as the expenditure involved under these two heads is concerned the question is answered in favour of the Revenue and against the assessee. With regard to the benefit claimed towards the payment of personal accident insurance, the assessee is not entitled to have the benefit of the relevant Section for the reason that there is no benefit to the employees, but the ultimate beneficiary in the event of an accident taking place is the employer himself. Since there is no benefit or amenity granted or provided to the employee, the payment of personal accident insurance premium cannot be subject to the ceiling limit provided under Section 40(c)/40A(5) of the Act. It has been so held by this court in CIT v. T. V. Sundaram lyengar and Sons [1999] 235 ITR 491, and by following the said decision, we answer this question in favour of the Revenue and against the assessee (sic). With regard to the expenditure involved towards club fees, this court in Mercantile Credit Corporation Ltd. v. CIT [2000] 245 ITR 245, has held as follows (page 249) : "Becoming a member of a club by the various employees of the company may be for the personal benefit of such employee or employees, in the sense of enjoying amenities and facilities provided by the club, either in the form of recreation or sports activities. That sort of membership may not be having any correlation to the legitimate needs of the company." It has also been held that the expenditure incurred by the assessee-company by payment of club subscriptions to various employees cannot fall within the permissible deduction prescribed under Section 40A(5) of the Income-tax Act. Therefore, this question is answered against the asses-sec and in favour of the Revenue (sir). The second question, i.e., deduction claimed in respect of travelling allowance, it has already been answered by this court in Beardsell Ltd. v. C JT [2000] 246 ItR 505, wherein this court observed thus (page 508) : "The word 'travelling' is no doubt capable of being construed in a narrow way as to limit it to the actual time spent on travel, i.e., the time actually spent on road, rail or air while travelling from one destination to another. In the Income-tax Rules, 1962, Rule 6D and in Section 37, however, that term has been used in a wider sense to include the entire period of absence from the headquarters including the period from the time of the departure till the time of the return, and including the time spent on actual travel and the time spent staying in hotels or elsewhere during the period when the person was not actually travelling, but remained outside the headquarters and had incurred expenditure on such a stay. Though it may well be that the Legislature could have used two different terms such as travel and stay, the fact that it has chosen to use the single term 'travelling1 to include the entire period of absence from the headquarters does not by itself warrant giving a narrow interpretation to the word 'travelling' in Section 37(1) and Rule 6D, having regard to the fact that in both these provisions, hotel expenses have been expressly referred to. It is not possible to conceive of a person staying in a hotel and also actually travelling at the same time, even though the comforts available by various modes of travel have now improved to such an extent that they can almost be equated to the comforts available in a luxury hotel. That however, does not lead to the conclusion that a person is deemed to be staying in a hotel even while he is travelling or that he is deemed to be travelling even he is in hotel, using the word 'travel' in narrow sense. That word has been used in a wider sense in the statutory provisions."
(3.) THE question has also been answered in favour of the Revenue and against the assessee. Applying the ratio of the said decision, we also answer this question in favour of the Revenue and against the assessee. The third question is as to whether the Tribunal is right in upholding the disallowance of the depreciation amounting to Rs. 4,40,029 for the assessment year 1983-84. Similar question has been answered by this court in Sree Karpagambal. Mills Ltd. v. CIT [1999] 238 ITR 842, wherein it has been held that by the introduction of the Income-tax (Fourth Amendment) Rules, 1983. by which the higher rate of depreciation was laid down came into effect on April 2, 1983. The assessment year 1983-84 commenced on April 1, 1983. In other words, this new Rule was not intended to be made applicable to the assessment year 1983-84. The rates of depreciation laid down in the Rules, in our view, are matters of substantive law. The new rates were intended to apply only from the assessment year 1984-85 since these were not in force on the first day of April, 1983, on which the assessment year 1983-84 began. In the instant case also the period relates to the assessment years 1983-84 and 1984-85 and the amended Rule came into force on April 2, 1983. The amended Rule is not to be allowed in all cases, which are pending on April 2, 1983, irrespective of the assessment year involved and depreciation under the said Rule, can, if at all be allowed only in 1984-85 and subsequent years. The principles laid down in the said case are squarely applicable to the case on hand and we hold that this question has got to be answered in favour of the Revenue and against the assessee. ;