- (1.) - The assessee is a non-resident banking company. In respect of assessment years 1975-76 and 1976-77 the assessing officer, for the purpose of working of the disallowance under Section 40A(5) of the Income-tax Act, 1961, estimated the value of the perquisite of free cars provided to the employees at 50% of the expenses of running and maintenance of the cars. On appeal the Commissioner of Income-tax (Appeals) held that the value of perquisite of free cars provided to the employees is fixed by Rule 3(c ) of the Income-tax Rules, 1962 and the same value should be taken to be the value of the perquisite of the free cars provided to the employees for the purpose of making the disallowance under Section 40A(5). In further appeal the Income-tax Appellate Tribunal upheld the order of Commissioner of Income-tax (Appeals), in view of the decision of Calcutta High Court in the case of Commissioner of Income-tax, West Bengal v. Britannia Industries Co. Ltd. (1982) 135 ITR 35 (Cal).
(2.) At the instance of the Revenue, the question that was referred to the High Court for its opinion was as follows : Whether, on the facts and in the circumstances, and on a correct interpre-tation of Section 40A(5) of the Income-tax Act, 1961 and Rule 3(c ) of the Income-tax Rules 1962, the Appellate Tribunal was justified in law in holding that the value of the free car provided to the employees for the purpose of working out the disallowance case of the employer i.e. the assessee-company should be the same as prescribed by Rule 3(c ) of the Income-tax Rules, 1962 in the case of the employee
(3.) The High Court by impugned judgment and order answered the question in favour of the assessee, relying upon its earlier decision in the case of Geoffrey Manners and Co. Ltd. v. Commissioner of Income-tax (221 ITR 695);