Harrisons Malayalam Ltd. (No. 2) vs Commissioner of Income Tax

K.S. Paripoornan, J.—At the instance of the assesses to Income Tax, the Income Tax Appellate Tribunal has referred the following question of law for the decision of this court:

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the expenditure incurred by the assessee for the maintenance of the buildings given for the residence of their employees and the depreciation thereon can be taken into account for the purpose of disallowance u/s 40A(5) of the Income Tax Act, 1961 ?"

The respondent is the Revenue. We are concerned with the assessment years 1978-79 and 1979-80. The Income Tax Officer made certain disallowances u/s 40A(5), holding that the entire expenditure incurred by the company and the assets provided to its employees both for personal and official purposes and the depreciation on the assets so provided constituted perquisites. The decision was confirmed in appeal by the Commissioner of Income Tax (Appeals) who followed the decision of this court in Commissioner of Income Tax Vs. Forbes, Ewart and Figgis (P.) Ltd. and Harrison and Crossfield Ltd., . The Appellate Tribunal confirmed the decision of the authorities below. It is thereafter at the instance of the assessee that the question of law formulated hereinabove has been referred by the Appellate Tribunal for the decision of this court.

We heard counsel. Prima facie, the Commissioner of Income Tax (Appeals) and also the Appellate Tribunal have upheld the disallowances u/s 40A(5) on the basis of the decision of this court in Commissioner of Income Tax Vs. Forbes, Ewart and Figgis (P.) Ltd. and Harrison and Crossfield Ltd., . The decision of the Appellate Tribunal is in accord with the above decision of this court. Even in cases where the assessee collected rent for the building occupied by the employees of the assessee, we had occasion to hold in I. T. R. Nos. 439 to 443 of 1985 Harrisons and Crossfield (India) Ltd. Vs. Commissioner of Income Tax, ) that the receipt of rent or consideration by the employer from the employees for the use of the employer''s asset is not a criterion to hold that the reckoning of the expenditure and the depreciation of the building for the purpose of limiting the expenditure under the aforesaid statutory provisions are not permissible. In I. T. R. Nos. 439 to 443 of 1985, judgment dated October 18, 1989 Harrisons and Crossfield (India) Ltd. Vs. Commissioner of Income Tax, ) we had held that the entire expenditure incurred by the assessee for the maintenance of the building given for the residence of the employees and the depreciation thereon can be taken into account for the purpose of disallowance u/s 40(a)(v)/40A(5) of the Income Tax Act. In the light of the decision of this court in Commissioner of Income Tax Vs. Forbes, Ewart and Figgis (P.) Ltd. and Harrison and Crossfield Ltd., and also the Bench decision of this court in I. T. R. Nos. 439 to 443 of 1985, ( Harrisons and Crossfield (India) Ltd. Vs. Commissioner of Income Tax, ), we answer the question referred to us in the affirmative, against the assessee and in favour of the Revenue.

The Income Tax references are disposed of accordingly.

A copy of this judgment under the seal of this court and the signature of the Registrar will be forwarded to the Income Tax Appellate Tribunal, Cochin Bench.