I.P. Mukerji, J. - (1.) This is a reference application under Section 256(1) of the Income Tax Act, 1961. In the statement of the case drawn up by the Income Tax appellate tribunal, further to the direction of this Court, ten questions of law were framed by it. Mr. J. P. Khaitan, learned Senior Advocate appearing for the applicant does not canvas questions 5, 7 and 8. The other questions are set out below: 1. Whether the Tribunal was justified in holding that for the purpose of entitlement to weighed deduction under Section 36 (1) (ii a) of the Income Tax Act, 1961 the income of employees chargeable under the head 'salaries' before allowance of standard deduction under Section 16 of the Act was to be considered? 2. Whether the Tribunal was justified in holding that loss under Section 32 (1) (iii) of the Act was allowable not in the year in which fixed assets were discarded but only in the year in which they were sold? 3. Whether on the facts and in the circumstances the Tribunal was right in rejecting the assessee's claim that the sum of Rs.4,25,450 having been estimated as the value assets scrapped in the immediately preceding assessment year and added back, should be allowed as deduction from income arising on sale of the said assets in the previous year? 4. Whether, in view of the fact that motor cars were provided the senior employees both for official and personal use, the Tribunal was justified in holding that the entire expenditure on such motor cars was liable to be disallowed under Section 40(6) of the Act? 6. Whether in view of the fact that telephones were provided at the residence of employees both for official and personal use the Tribunal was justified in confirming disallowance under Section 40A(5) of the entire expenditure on telephones amounting to Rs.2,14,690? 9. Whether, on the facts, the Tribunal was right in holding that deduction claimed under Section 35B(1) (iv) of the Act in respect of commission payable outside India amounting to Rs.27,95,058 was not allowable? 10. Whether, the Tribunal was justified in holding that depreciation on moulds used for manufacture of glass was rightly restricted to 10% against 30% claimed by the assessee?
(2.) To answer the first question, one has to consider Section 36(1) (iia) of the Income Tax Act, 1961 as prevailing in the assessment year 1983-84. It laid down that the assessee was entitled to deduction amounting to 1 and 1/3rd times the amount of expenditure incurred on the payment of salary for the period of employment before 1st March, 1984 to an employee suffering from physical disabilities mentioned in the sub-section. The proviso is very important. It said that this subsection would not apply to an employee whose income "chargeable under the head" "salaries" exceeded Rs.20,000/- per month.
(3.) Now, the question is: what is to be taken as the salary the gross amount or the net after deduction. The case of the revenue is that it is the gross amount whereas the assessee contends that it is only the net amount as mentioned in Section 16 which is relevant.;