Y.R. Meena, J. - (1.) ON an application under Section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following question for our opinion : "Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the entire travel concession or assistance received by the employee has to be excluded from the purview of Section 40A(5) of the Act read with Section 10(5) and Rule 2B of the Income-tax Rules ?"
(2.) THE asses see-company has filed the return on June 27, 1990, disclosing net profit of Rs. 5,89,45,220. During the course of assessment, the Assessing Officer noticed that the company has paid travelling allowances in contravention of Rule 2B of the Income-tax Rules, 1962. THErefore, the amount of Rs. 8,873 has been disallowed in the hands of the employee. THE Assessing Officer has taken the view, when the amount of Rs. 8,873 is not exempted under Section 10(5) of the Act of 1961, this amount should not be excluded for disallowance under 1tion 40A(5) of the Act of 1961, in the hands of the assessee-company also. In appeal before the Commissioner of Income-tax (Appeals), the Commissioner of Income-tax (Appeals) has also confirmed the view taken by the Assessing Officer. In appeal before the Tribunal, the Tribunal has considered the provisions of Section 40A(5) and Rule 2B of the Income-tax Rules, 1962, and also the provisions of Section 10(5) of the Act of 1961. THE Tribunal has taken the view that the entire travel concession or assistance has to be excluded from the purview of Section 40A(5). Heard learned counsel for the parties. Learned counsel for the Revenue submits that the provisions of Section 40A(5) especially the second proviso which provides that in computing the expenditure referred to in Sub-clause (i) or the expenditure or allowance referred to in Sub-clause (ii) of this clause or the aggregate referred to in the foregoing proviso, the following shall not be taken into account, namely, the value of any travel concession or assistance referred to in Clause (5) of Section 10 of the Act. He further submits that Clause (5) of Section 10 provides the exemption in respect of the travel concession or assistance received by the individual from his employer, which provides that the exemption shall be subject to such conditions as may be prescribed. Rule 2B provides the limit on the leave travel concession, for exemption under Section 10, Clause (5) of the Act. If the payment or leave travel concession or travelling assistance has been given more than the limit that amount exceeding the limit exempted under Section 10(5) of the Act is taxable. In other words if any concession is given more than the limits provided in Rule 2B that is not exempted in Clause (5) of Section 10 of the Act and when that is not exempted in the hands of the individual employee, how that should be excluded for the purpose of disallowance under Section 40A(5) of the Act ?
(3.) LEARNED counsel for the assessee, Dr. Pal, submits that Section 40A(5) refers to leave travel concession and not the limit prescribed on that under Rule 2B of the Rules, 1962. The second proviso to Section 40A(5) reads as under : "Provided further that in computing the expenditure referred to in Sub-clause (i) or the expenditure or allowance referred to in Sub-clause (ii) of this clause or the aggregate referred to in the foregoing proviso, the following shall not be taken into account, namely :-- (i) the value of any travel concession or assistance referred to in Clause (5) of Section 10 ;" ;