- (1.) AT the instance of the Revenue, the Income-tax Appellate Tribunal referred the following question for the opinion of this court : " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is legally correct in its opinion that personal allowance of Rs. 800 per month was includible in the basic salary for the purpose of computing the disallowance under Section 40(c)(iii) of the Income-tax Act, 1961 ?"
(2.) THE assessee is a company, the head office of which is at Kanpur. THE assessee-company, during the previous year relevant for the assessment year 1968-69, appointed Sri Gundu Rao on monthly cash remuneration of Rs. 2,950 including personal, entertainment, servants and bungalow maintenance allowance, etc. Apart from cash remuneration, he was allowed certain perquisites as well. THE total remuneration paid to Sri Rao came to Rs. 43,500, the details of which are given below : JUDGEMENT_863_ITR225_1997Html1.htm The Income-tax Officer in his assessment order, bereft of details, disallowed Rs. 21,900 under Section 40(c)(iii) of the Income-tax Act, 1961 (briefly, "the Act"), which, inter alia, includes the disallowance of Rs. 9,600 representing the personal allowance. On appeal by the assessee, the Appellate Assistant Commissioner affirmed the order of the assessing authority in this behalf.
(3.) ON further appeal, the Income-tax Appellate Tribunal accepted the contention of the assessee that the personal allowance amounting to Rs. 9,600 paid to Sri Rao being a part of the salary, was not disallowable under Section 40(c)(iii) of the Act. The question for consideration is whether the Appellate Tribunal rightly held that payment of personal allowance was nothing but salary. Section 40(c)(iii) of the Act runs as follows : " (iii) any expenditure incurred after the 29th day of February, 1964, which results directly or indirectly in the provision of any benefit or amenity or perquisite, whether convertible into money or not, to an employee (including any sum paid by the company in respect of any obligation which but for such payment would have been payable by such employee), to the extent such expenditure exceeds one-fifth of the amount of salary payable to the employee for any period of his employment after the aforesaid date." ;