Ajit Kumar Sengupta, J. - (1.) In this reference under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1977-78, the following questions of law have been referred to this court : "(1) Whether, on the facts in the circumstances of the case, the Tribunal was justified in holding that the perquisites in terms of Rule 3 of the Income-tax Rules, 1962, alone would be the ceiling in the hands of the assessee-company under Section 40(c)(iii) of the Income-tax Act, 1961. (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the interest paid or payable for the arrear cess for delayed payment should be allowed as a legitimate business expenditure while computing the assessee's total income for the previous year corresponding to the assessment year 1977-78. (3) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the legal expenses in connection with the writ petition filed by the assessee against the Government orders under the Sugar Control Order should be allowed as business expenditure."
(2.) The facts relating to the first question are that the Income-tax Officer made a disallowance of Rs. 22,664 in terms of Sub-section (5) of Section 40A of the Income-tax Act, 1961, on account of certain perquisites, including concessional residential accommodation. The working of the disallowance of Rs. 22,664 has been given by the Income-tax Officer as annexure to the assessment order for the assessment year 1977-78. On appeal, the Commissioner of Income-tax (Appeals) confirmed the order of the Income-tax Officer on this point.
(3.) The matter was taken up in appeal to the Tribunal. The Tribunal accepted the assessee's plea by observing as follows : "As regards the perquisite relating to accommodations provided to the directors, we hold that, on parity of reasoning, the perquisite in terms of Rule 3 of the Income-tax Rules, 1962, alone would be the ceiling in the hands of the assessee-company under Section 40(c)(iii) of the Income-tax Act, 1961. This view is supported by the decision of the Calcutta High Court in the recent case of Britannia Industries Co. Ltd. [ 1982] 135 ITR 35.";