Ajit K. Sengupta, J. - (1.) In this reference under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1979-80, the following questions of law have been referred to this court : "1. Whether, on the facts and in the circumstances of the case, and on a correct interpretation of the words 'salary' and 'perquisite' as defined in Explanation 2 to Section 40A(5) of the Income-tax Act, 1961, the Tribunal was justified in holding that the cash allowances would form part of salary paid to the employees for the purpose of computing the disallowance under Section 40A(5) of the said Act "
(2.) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the sum of Rs. 65,421 paid to the managing director as salary and perquisites, which became recoverable from the payee within the relevant 'previous year' by virtue of his appointment not getting the approval of the Central Government was allowable as a deduction in computing the assessee's income for the assessment year 1979-80?" 2. Shortly stated, the facts are that the Income-tax Officer included the cash allowance as perquisite for the purpose of disallowance under Section 40A(5) of the Act.
(3.) The Commissioner of Income-tax (Appeals) held that the cash allowances made to the assessee's employees were not perquisite within the meaning of Section 40A(5) and, accordingly, directed the Income-tax Officer to compute the disallowance under Section 40A(5) by excluding the cash allowances made to the assessee's employees.;