COMMISSIONER OF INCOME-TAX VS SHOLINGER TEXTILES LTD., 2001 PTD-MADRAS-HIGH-COURT-INDIA 3549 (1998)

Income‑tax‑‑‑

‑‑‑‑Reference‑‑‑Business expenditure‑‑‑Ceiling on expenditure‑‑‑Computation of expenditure for purposes of S. 37(3A)‑‑‑Expenditure on maintenance of motor car‑‑‑Tribunal correct in holding that driver's salary is not an expenditure on maintenance of a motor car‑‑‑No question of law arose Indian Income Tax Act, 1961, Ss‑37 & 256.

Held, dismissing the application to direct reference, that a driver's salary can, if at all, be classified as "wages". A driver has to be paid salary irrespective of whether the motor car is driven or not. The Tribunal was correct in holding that a driver's salary will not come within the ambit of expenditure on maintenance of motor cars falling within clause (ii) of subsection (3B) of section 37 of the Income Tax Act, 1961. No question of law arose from its decision.

Mrs. Chitra Venkatarman for the Commissioner.

Mrs. Asha Vijayaraghavan for Subbaraya Aiyar, Padmanabhan and Ramamani for the Assessee.

JUDGMENT

This tax case petition, at the instance of the Commissioner of Income‑tax, Tamil Nadu II, Madras, is for issuance of a direction to the Tribunal to state a case and refer the question of law, as below, for the opinion of this Court:

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the driver's salary should not be taken into consideration, while making the disallowance under section 37(3A) of the Income Tax Act?"

The Tribunal expressed the opinion that the answer to this question is self‑explanatory and hence this question does not require a reference. We also feel the same way, as the Tribunal felt.

Subsection (3A) of section 37 of the Income Tax Act, 1961 (Act No.43 of 1961, for short "the I.T. Act"), prescribes:

"Notwithstanding anything contained in subsection (1), where the expenditure or, as the case may be, the aggregate expenditure incurred by an assessee on any one or more of the items specified in subsection (3B) exceeds one hundred thousand rupees, twenty per cent. of such excess shall not be allowed as deduction in computing the income chargeable under the head 'Profits and gains of business or profession'. "

Subsection (3B) of section 37 of the Income‑tax Act reads as under.

"The expenditure, referred to in subsection (3A) is that incurred on‑‑‑

(i) advertisement, publicity and sales promotion; or

(ii) running and maintenance of aircraft and motor cars; or

(iii) payments made to hotels.

Explanation.‑‑‑For the purposes of subsections (3A) and (3B),‑‑

(a) The expenditure specified' in clause (i) to clause (iii) of sub section (3B) shall be the aggregate amount of expenditure incurred by the assessee as reduced by so much of such expenditure as is not allowed under any other provision of this Act;

(b) expenditure on advertisement, publicity and sales promotion shall not include remuneration paid to employees of the assessee engaged in one or more of the said activities; .

(c) expenditure on running and maintenance of aircraft and motor cars shall include‑‑‑

(i) expenditure incurred on chartering any aircraft and expenditure on hire charges for engaging cars plied for hire;

(ii) conveyance allowance paid to employees and, where the assessee is a company, conveyance allowance paid to its directors also."

The moot question that arises for consideration is as to whether the driver's salary paid will come within the four corners of maintenance of motor cars, falling within clause (ii) of subsection (3B) of section 37 of the Income‑tax Act.

"Driver's salary" can, if at all, be classified as "wages". A driver has to be paid

"salary", as had been observed by the Tribunal in disposing of the appeal, per month, whether the motor car is driven out or not. Such being the case, to say that the "driver's salary" will be includible in the maintenance of car, as had been observed by the Revenue is beyond one's comprehension. Therefore, we uphold the view of the Tribunal that the "driver's salary" paid cannot at all figure as an item of expenditure to be includible in clause (ii) of subsection (3B) of the section 37 of the Act. In this view of the matter, the question, as set out above, is not a referable question of law at all.

The tax case petition, therefore, deserved to be dismissed and the same, is accordingly dismissed. No costs.

M.B.A./394/FC

Petition dismissed.

Income‑tax‑‑‑

‑‑‑‑Reference‑‑‑Business expenditure‑‑‑Ceiling on expenditure‑‑‑Computation of expenditure for purposes of S. 37(3A)‑‑‑Expenditure on maintenance of motor car‑‑‑Tribunal correct in holding that driver's salary is not an expenditure on maintenance of a motor car‑‑‑No question of law arose Indian Income Tax Act, 1961, Ss‑37 & 256.

Held, dismissing the application to direct reference, that a driver's salary can, if at all, be classified as "wages". A driver has to be paid salary irrespective of whether the motor car is driven or not. The Tribunal was correct in holding that a driver's salary will not come within the ambit of expenditure on maintenance of motor cars falling within clause (ii) of subsection (3B) of section 37 of the Income Tax Act, 1961. No question of law arose from its decision.

Mrs. Chitra Venkatarman for the Commissioner.

Mrs. Asha Vijayaraghavan for Subbaraya Aiyar, Padmanabhan and Ramamani for the Assessee.

JUDGMENT

This tax case petition, at the instance of the Commissioner of Income‑tax, Tamil Nadu II, Madras, is for issuance of a direction to the Tribunal to state a case and refer the question of law, as below, for the opinion of this Court:

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the driver's salary should not be taken into consideration, while making the disallowance under section 37(3A) of the Income Tax Act?"

The Tribunal expressed the opinion that the answer to this question is self‑explanatory and hence this question does not require a reference. We also feel the same way, as the Tribunal felt.

Subsection (3A) of section 37 of the Income Tax Act, 1961 (Act No.43 of 1961, for short "the I.T. Act"), prescribes:

"Notwithstanding anything contained in subsection (1), where the expenditure or, as the case may be, the aggregate expenditure incurred by an assessee on any one or more of the items specified in subsection (3B) exceeds one hundred thousand rupees, twenty per cent. of such excess shall not be allowed as deduction in computing the income chargeable under the head 'Profits and gains of business or profession'. "

Subsection (3B) of section 37 of the Income‑tax Act reads as under.

"The expenditure, referred to in subsection (3A) is that incurred on‑‑‑

(i) advertisement, publicity and sales promotion; or

(ii) running and maintenance of aircraft and motor cars; or

(iii) payments made to hotels.

Explanation.‑‑‑For the purposes of subsections (3A) and (3B),‑‑

(a) The expenditure specified' in clause (i) to clause (iii) of sub section (3B) shall be the aggregate amount of expenditure incurred by the assessee as reduced by so much of such expenditure as is not allowed under any other provision of this Act;

(b) expenditure on advertisement, publicity and sales promotion shall not include remuneration paid to employees of the assessee engaged in one or more of the said activities; .

(c) expenditure on running and maintenance of aircraft and motor cars shall include‑‑‑

(i) expenditure incurred on chartering any aircraft and expenditure on hire charges for engaging cars plied for hire;

(ii) conveyance allowance paid to employees and, where the assessee is a company, conveyance allowance paid to its directors also."

The moot question that arises for consideration is as to whether the driver's salary paid will come within the four corners of maintenance of motor cars, falling within clause (ii) of subsection (3B) of section 37 of the Income‑tax Act.

"Driver's salary" can, if at all, be classified as "wages". A driver has to be paid "salary", as had been observed by the Tribunal in disposing of the appeal, per month, whether the motor car is driven out or not. Such being the case, to say that the "driver's salary" will be includible in the maintenance of car, as had been observed by the Revenue is beyond one's comprehension. Therefore, we uphold the view of the Tribunal that the "driver's salary" paid cannot at all figure as an item of expenditure to be includible in clause (ii) of subsection (3B) of the section 37 of the Act. In this view of the matter, the question, as set out above, is not a referable question of law at all.

The tax case petition, therefore, deserved to be dismissed and the same, is accordingly dismissed. No costs.

M.B.A./394/FC

Petition dismissed.