COMMISSIONER OF INCOME TAX, BOMBAY ETCversusM/S. MAFATLAL GANGABHAI AND CO. (P) LTD. ETC.

                COMMISSIONER OF INCOME TAX, BOMBAY ETC                              A
                                           v.
             M/S. MAFATLAL GANGABHAI AND CO. (P) LTD. ETC.

                                   MARCH 12, 1996

                [B.P. JEEVAN REDDY AND M.K. MUKHERJEE, JJ.]                         B

              Income Tax Act, 1961-Sections 40(a)(V) and 40-A(S)-Amounts not
        deductible in computing the income chargeable under the head 'Profits and
        Gains of Business of Profession '-Payments made in cash by an assessee to
        its employeei~Whether fall within the mischief of Sec. 40(a)(v) and Sec.    C
        40-A(S) of the Act-Held, No.

              During the accounting year relevant to the Assessment Year 1982-83,
        the assessee, a limited company made payments in cash to its employee.,
        on account of house rent allowance, conveyance allowance and medical
        reimbursement and claimed deduction. The Income Tax Officer disallowed D
        these holding that the payments fall within mischief of section 40-A(S) of
_,. ·   the Income Tax Act, 1961. On appeal, the Commissioner of Income Tax
        (Appeals) upheld the assessee's claim that cash payments cannot be
        treated as 'perquisites' ·for the purpose of and within the meaning of
        Section 40-A(S). Revenue's appeal to the Tribunal was dismissed. Applica- E
        lions U/S 256(1) filed by the Revenue was also dismissed by the Tribunal.
        Applications under s. 256(2) were rejected by the High Courts. These
        appeals had been filed against orders of the High Courts rejecting the
        Revenue's applications U/S 256(2) of the Act.

               The assessee contended that such cash payments made was not F
        within the mischief of sub-clause (v) of Section 40(a) as what is within the
        mischief of the sub-clause is an expenditure incurred for providing benefit,
        amenity or perquisite to an employee and that a cash payment to the
        employee is not an 'expenditure' contemplated by the cash sub-clause and
        that the use of the qualifying words 'whether convertible into money or not' G
        puts the matter beyond doubt. According to the Revenue, whether the
        assessee takes a house on rent and provides it to the employee or pays a
        cash amount directly to the employee asking him to find a house on rent
        himself should make no difference.

              Dismissing the appeals, this Court                                    H
                                           227
    228                   SUPREME COURT REPORTS                    [1996] 3 S.C.R.

A          HELD : 1.1. The language employed in sub-clause (v) of clause (a)
    of Section 40 of the Income Tax Act, 1961, is not capable of taking within
    its ambit cash payments made to the employees by the assessee. These cash         '
    payments will, of course, be treated as salary paid to the employees and
    will be subject to the limits/ceiling, if any, in that behalf. But they cannot
    be brought within the purview of the words "any expenditure which results
B
    directly or indirectly in the provision of any benefit or amenity or per-
    quisite" - more so because of the following words "whether convertible into
    money or not". [237-B-C]

          1.2. Except for certain structural changes, Section 40- A(5) (a) (ii) and
C   Section 40(a)(v) are similar in all material aspects. [237-H]

           1.3. The words "including any sum paid by the assessee in respect of
    any obligation which but for such payment would have been payable by
    such employee" in Section 40(a)(v) as well as in Section 40-A(5)(A)(ii)
    contemplate a situation where the assessee makes a payment (in cash) in
D   respect of an obligation • obligation of the employee • which would have
    been payable by the employee if it is not paid by the assessee. The payment
    by the assessee contemplated by these words is not evidently a payment to             •
    the employee but to a third party, no doubt, on account of the employee.
    Sub-clause (v) of the definition of "perquisite" in clause (b) of Explanation
E   (2) to sub-section (5) also refers to cash payment but that too is not to the
    employee, though undoubtedly for his benefit. Therefore cash payments by
    an assessee to his its employees do not fall within the ambit of Section
    40(a)(v) or Section 40-A(5)(a)(ii), as the case may be. [238-B-D]

          Commissioner of Income Tax v. Commonwealth Tmst Limited, (1982)
F   135 !TR 19 Ker (FB), overruled.                                                       •
          Co1nmissioner of Income Tax, Kemataka v. Mysore Co1nn1ercial Union
  Limited, (1980) 126 l.T.R. 340; Commissioner of Income Tax v. Shriram
  Refrigeration Industries Limited, (1992) 197 l.T.R. 431 (Delhi); Commis-
  sioner of Income Tax v. Kanan Devan Hills Produce Company Limited,
G (1979) 119 I.T.R. 431 (Calcutta); Commissioner of Income Tax v. lndokem
  Private Limited, (1981) 132 I.T.R. 125 (Bombay); Commissioner of Income
  Tax v. Warner Hindustan Limited, (1984) 145 I.T.R. 24 (Andhra Pradesh);
  Instalment Supply Private Limited v. Commissioner of Income Tax, (1984)
  149 l.T.R. 458 (Delhi); Commissioner of Income Tax v. Manjushree Planta-
H Lions Limited, (1980) 125 I.T.R. 150 (Madras) and Commissioner of Income
     Cl.T. v. MAFATLAL GANGABHAI AND CO. [B.P. JEEVAN REDDY, J.J         229

Tax v. New India Industries Limited (1993) 201ITR208 (Gujarat), affirmed.       A
     CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2215 of
1978 Etc. Etc.

     From the Judgment and Order dated 14.11.1978 of the Bombay High
Court in l.T. Application No. 281of1977.                                        B
      Ranbir Chandra and S.N. Terdol for the Appellants.

     G.C. Sharma, Mrs. A.K. Verma, Santosh K. Aggarwal and Vinay
Yaish for the Respondents.
                                                                                c
      The Judgment of the Court was delivered by

        B.P. JEEVAN REDDY, J. Leave granted in the Special Leave
Petition.

      The only question in this batch of appeals is whether the payments        D
made in cash by an assessce to its employees are within the mischief of
Section 40(a)(v) and Section 40-A(5). Sub-clause (v) was inserted in clause
(a) of Section 40 by the Finance Act, 1968 with effect from 1'1.pril 1, 1969.
Section 40(a)(v) reads as follows :
                                                                                E
        S.40. Amounts not. deductible. - Notwithstanding anything to the
        contrary in (sections 30 to 38), the following amounts shall not be
        deducted in computing the income chargeable under the head
         Profits and gains of business of profession 1,-
        11                                           1




        (a) in the case of any asscssee·                                        F
        (v) any expenditure which results directly or indirectly in tile
        provision of any benefit or amenity or perquisite, \vhether convert-
        ible into money or not, to any employee (including any sum paid
        by the assessee in respect of any obligation which but for such
        payment would have been payable by such employee) or any                G
        expenditure or allowance. in respect of any assets of the assessee
        used by such employee either wholly or partly for his own purposes
        or benefit, to the extent such .expenditure or allowance exceeds
        one-fifth of the amount of salary payable to the employee, or an
        amount calculated at the rate of one thousand rupees for each           H
                                                                                  ~
                                                                                  '
    230                 SUPREME COURT REPORTS                  [1996] 3 S.C.R.

A         month or part thereof comprised in the period of his employment
          during the previous year, whichever is less :

             Provided that in computing the aforesaid expenditure or al-
          lowancc, the following shall not be taken into account, namely :

B         (a) any payment by way of gratuity;

          (b) the value of any travel concession or assistance referred to in
              clause (5) of section 10;

          (c)   passage moneys or the value of any free or concessional
c               passage referred to in sub-clause (i) of clause (6) of section
                10;

          (d) any payment of tax referred to in sub-clause (vii) or sub-
              clause (vii-a) of clause (6) of section 10;

D         (e) any sum referred to in sub-clause (vii) of clause (1) of section
              17;

          (t)   any sum referred to in sub-clause (v) of clause (2) of section
                17;

E         (g) the amount of any compensation referred to in sub-clause (i)
              or any payment referred to in sub-clause (ii) of clause (3) of
              section 17;

          (h) any payment referred to in clause ('l;i) or clause (v) of sub-
              section (1). of section 36; and
F
          (i)   any expenditure referred to in clause (ix) of sub-section (1)     •
                of section 36 :

             Provided junher that nothing in this sub-clause shall apply to
          any expenditure which results directly or indirectly in the provision
G
          of any benefit or amenity or perquisite to an employee whose
          income chargeable under the head "Salaries" is seven thousand fiye
          hundred rupees or less.

          Explanation J. - The Provisions of this sub-clause shall apply
H         notwithstanding that any amount not to be allowed under this
     C.l.T.v.MAFATI..ALGANGADllAIANDCO. (D.P.JEEVANREDDY,J.)              231

        sub-clause is included in the total income of the employee.              A
        Explanatio.n 2. - In this sub-clause, the word 'salary' shall have
        the meaning assigned to it in clause (h) of rule 2 of Part A of the
        Fourth Schedule." ·

      Sub-clause (v) of Section 40(a) was omitted by the Finance (No. 2)         B
Act. 1971. which simultaneously introduced sub-section (5) in Section
40-A. Sub-section (5) of Section 40-A, omitting unnecessary clauses. reads
thus:

        "S.40-A. Expenses or payments not deductible in certain circumstan-
        ces. - (1) The provisions of this section shall have effect not-
        withstanding anything ·to the contrary contained in any other
        provision of this Act relating to the computation of income under
        the head 'Profits and gains of business or profession' -
                    .                            .
        (5)(a) Where the assessee :_ ·                                           D
        (i) incurs any expenditure which results directly or indirectly in the
        payment of any salary to an employee or a former employee, or
         ~                                                    .
        (ii) incurs any expenditure which results directly or indirectly in
        the provision of any perquisite (whether ronvertible,into money or       E
        not) to an employee or incurs directly or indirectly any expenditure
        or is entitled to any allowance in respect of any. assets of the
        assessee used by an employee either wholly or partly for his own
        purposes or benefit,

        then, subject to the provisions of clause (b), so . much of such         F
        expenditure or allowance as is in excess of the limit specified in
        respect thereof in clause (c) shall not be allowed as a deduction:

             Provided that where the assessee is a company, so much of the
        aggregate of -                                                           G
        (a) the expenditure and allowance referred to in su~clausc (i) and
        (ii) of this clause; and         ·            ·

        (b) the expenditure and allowance referred to in sub-clauses (i)
        and (ii) of. clause (c) of section 40,                                   H
    232                  SUPREME'COURTREPORTS                     [1996] 3 S.C.R.

A           in respect of an employee or a former employee, being a director
            or a person who has a substantial interest in the company or a
            relative of the director or of such person, as is in excess of the sum
            of one hundred and two thousand rupees, shall in no case be
            allowed as a deduction :

B           Explanation 2. - In this sub-section, -

            (a) 'salary' has the meaning assigned to it in clause {1) read with
            clause (3) of section 17 subject to the following modifications,
            namely:

c           {1) in the said clause (1), the word 'perquisites' occurring in
            sub-clause (iv) and the whole of sub-clause (vii) shall be omitted;

            (2) in the said clause {3), the reference to 'assessee' shall be
            construed as reference to 'employee or former employee' and the
            references to 'his employer or former employer' and 'an employer
D
            or a former employer' shall be construed as references to 'the
            assessee';

            (b) 'Perquisite' means -

E           (i) rent-free accommodation provided to the employee by the
            assessee;

            (ii) any concession in the matter of rent respecting any accom-
            modation provided to the employee by the assessee;

            (iii) any benefit or amenity granted or provided fre~ of cost or at
F
            concessional rate to the employee by the assessee;

            (iv) payment by the assessee of any sum in respect of any obligation
            which, but for such payment, would have been payable by the
            employee; and
G
            (v) payment by the assessee of any sum, whether directly or
            indirectly or through a fund, other than a recognised provident
            fund or an approved superannuation fund, to effect an assurance
            on the life of the employee or to effect a contract for an annuity."

H         Section 40(a)(v) was introduced with a view to check the deductible
     C.l.T.v. MAFATI.ALGANGABllAIAND CO. [B.P.JEEVANREDDY,J.)           233

expenditure· incurred by. assessces. (including companies) in providing        A
amenities, benefits and perquisites to their higher paid employees. This
sub-clause is indeed an improvement upon Section 40(c)(iii) which
preceded it. Under sub-clause (v), the deduction in respect of expenditure
which results directly or indirectly in the provision of benefits etc. to au
employee is limited to au amount equal to one-fifth of salary paid to such     B
employee during the relevant year or to au amount calculated at the rate
of Rupees one thousand per month, whichever is less. Further, any expen-
diture incurred upon and any allowance. admissible to the asses-
see/employer in respect of any assets provided by him to the employee free
of charge or at a concessional rate is also brought within the purView of
the limits prescribed by the sub-clause. Payment of any sum in respect of C
any obligation, which, but for such payment, would have been payable by
the employee is also brought within the ambit of the sub-clause. Section
40-A(S) is au yet further improvement on Section 40(a)(v). Under sub-sec-
tion (5) of section 40-A, the following restrictions/limits have been placed;
( 1) any expenditure incurred by the assessee on payment of salary to au D
employee in respect of his period of employment in India during the
relevant year will not be allowed as a deduction in computing the taxable
profits to the extent it exceeds the amount calculated at the rate of Rupees
five thousand per month. (Similar restriction is placed on salary paid to an
ex-employee as well.) For this purpose, the expression 'salary ' is defined
in clause (a) of Explanation (2) to the sub-section (5). (2) Any expenditure E
incurred by the assessee in providing whether directly or indirectly any
perquisite (whether convertible intO money or not) to an employee and the
amount of expenditure or allowance (e.g., depreciation allowance) in
respect of assets of the asse;see used by the employee for his own purposes,
whether wholly or partly, will not be allowed as deduction in computing F
the profits of the business or profession, to the extent it exceeds twenty
pe1cent of the salary payable to the employee or an amount calculated at
the rate of Rupees one thousand per month, whichever is less. The expres-
sion 'perquisite' is defined in clause (b) of Explanation (2) to the sub-sec-
tion as including not only any benefit or amenity but also 'payment by the
assessee of any sum in respect of any obligation which, but for such .G
payment, would have been payable by the employee'.

       Certain types of expenditure are excluded from the purview of both          •
Section 40{a)(v) as well as Section 40-A{S)(a)(ii). For the sake of cornple-
tion, it may also be stated that though Section 40(a)(v) does not place any H
                                                                                ' ~·

    234                  SUPREME COURT REPORTS                   [1996] 3 S.C.R.

A   restriction upon the amount of salary payable to the employee, such a
    restriction was implicit in clause (c) of Secrion 40. Clause (c) of Section
    40 continued to be in force till March 31, 1989. It was omitted by Direct
    Tax Laws (Amendment) Act, 1987 along with sub-section (5) for Section
                                                                                       (
    40-A.
B          Inasmuch as the main arguments have been urged in Civil Appeal
    No. 5946of1994 and Civil Appeal No. 2215 of 1978, we shall state the facts
    of these two appeals alone to bring out the question. ·The assessee in Civil
    Appeal No. 5946 of 1994 is a limited company and the assessment year
    concerned is 1982-83. This appeal is preferred against an order of the Delhi
C   High Court rejecting an application. under Section 256(2) of the Income
    Tax Act filed by the Revenue. The question which the Revenue sought to
    raise is the following :

            'Whether on the facts and in the circumstances of the case, the
            ITAT is correct in law in holding that the payment in cash of House
D           Rent Allowance, conveyance allowance, medical reimbursement
            etc. should not be treated as perquisite u/s 40A(5) of the I.T. Act.'

          During the accounting year relevant to the Assessment Year 1982-
    83, the assessee made payments in cash to its employees on account of
E   house rent allowance, conveyance allowance and medical reimbursement.
    The Income Tax. Officer disallowed the same holding that the said pay-
    ments fall within the mischief of Section 40.A(5). On Appeal, the Commis-
    sioner of Income Tai (Appeals) .upheld the assessee's contention that cash
    payments cannot be treated as 'perquisites' for the purpose of and within
    the meaning of Section 40-A(5). Revenue's appeal to the Tribunal was
F   dismissed. An application under Section 256(1) was also dismissed by the
    Tribunal whereupon it approached the High Court which too rejected its
    application under Section 256(2), as stated above.      ·

          Civil Appeal No. 2215 of 1978 is preferred against an order of the
G   Bombay High cOurt rejecting the Revenue's application under Section
    256(2) insofar as Questions (1) and (3) are concerned. This Court granted
    leave insofar as question No. 1 is concerned, .which reads :

            'Whether on the facts and in the circumstances of the case, the
            Tribunal was right in law in holding that the cash payments made
H           by the assessee to its Directors, such as house rent allowance,
     C.l.T. v. MAFA1LAL GANGABHAIAND CO. (B.P. JEEVAN REDDY, J.)         235

        conveyance allowance, furniture allowance etc. should not be con- A
        sidered 'perquisites' within the meaning of section 40(a)(v) of the
        Income Tax Act, 1961 ?"

      Leave was granted by this Court for the reason that there is a conflict
of opinion on the said question between the High Courts in the country.         B
The assessment year concerned in this appeal is 1971-72 and, therefore,
the relevant provision is Section 40(a)(v).


       We shall first take up Section 40(a)(v). According to Section 40,
which opens with a non-obstante clause, "notwithstanding anything to the
contrary in sections 30 to 38", the amounts mentioned in several clauses C
therein shall not be deducted in computing the income chargeable under
the head "Profits and gains of business or profession". Clause (a) contains
several sub-clauses. We are concerned with sub-clause (v) alone. The main
limb of sub-clause' (v) places, a limit upon two kinds of expenditure, viz.,
(a) any expenditure which results directly or indirectly in the provision of D
any benefit or amenity or perquisite whether convertible into money or not,
to an employee (including any sum paid by the assessee in respect of any
obligation which but for such payment would have been payable by such
employee) or (b) any expenditure or allowance in respect of any assets of
the assessee used by such employee either wholly or partly for his own
purposes or benefit. The limit prescribed - or ceiling provided, as it may E
be called - is one-fifth of the amount of salary payable to the employee or
an amount calculated at the rate of one thousand rupees for each month
or part thereof corr.prised in the period of his employment during the
previous year or whichever is less. Any expenditure over and above the said
limit/ceiling has to be disallowed. It is the first part to the sub-clause we
are concerned with in Civil Appeal No. 2215 of 1978. Now, what does the F
sub-clause say ? The opening words are "any expenditure which results
directly or indirectly in the provision or any benefit or amenity or per-
quisite, whether convertible into money or not, to an employee''. It is clear
frqm the above words that it is not any and every expenditure that is
attracted by the sub-clause but only such expenditure which results directly G
or indirectly in the provision of any benefit, amenity or perquisite to an
employee. Once this is so, it is immaterial whether such benefit, amenity
or perquisite is convertible into money or not. The words "directly or
indirectly" are equally significant. While the expressions "benefit" and
amenity are not d.efined by the Act, the expression "perquisite" is defined
in sub-section (2) Section 17. While it is not necessary to set out the entire H
    236                   SUPREME COURT REPORTS                    [1996] 3 S.C.R.

A   definition of "perquisite" in the said sub-section, it is sufficient to mention
    that it includes among others "the value of rent-free accommodation
    provided to the assessee by his employer". (The definition, it may be
    remembered, is worded from the point of view of and for the purposes of
    Section 17 which brings to tax income under the head "salaries". The said
    definition may not be strictly applicable to the expression "perquisites" in
B   Section 40(a)(v), yet it can be taken as broadly indicating the meaning of
    the said expression.) Now, take a case where the assessee provides a
    rent-free accommodation to its employee. It would be a "perquisite" within
    the meaning of sub-clause (v) and hence, the expenditure incurred by the
    assessee in providing such rent-free accommodation to its employee would
C   fall within the sub-clause. This would be so whether' the accommodation
    provided belongs to the assessee or is taken on rent by the assessee. In the
    latter event, the rent paid by the assessee to the owner of the house will
    be an expenditure incurred by the assessee in providing a perquisite to its
    employee within the meaning of the sub-clause. Similarly, any expenditure
    incurred by the asscssee in providing a benefit or amenity to its employee
D   will equally fall within the sub-clause. This much is not in dispute. Now,
    take another case where an assessee pays a cash amount of, say, Rupees
    five thousand to its employee asking him to find a house on rent himself
    instead of the assessee himself taking the house on rent and providing it
                                                                                      ..   I


    to the employee. In this case, however, the assessees say, such cash pay-
    ment made by the assessee is not within the mischief of the sub-clause while
E   the Revenue characterises the assessee's contention as ex-facie illogical and
    absurd. In principle, it should make no difference, the Revenue submits,
    whether the assessee takes a house o.n rent and provides it to the employee
    or pays a cash amount directly to the employee asking him to find a house
    on rent himself. The counsel for the Revenue commended the reasoning
p   and conclusion of the Full Bench of the Kerala High Court in Commis-
    sioner of Income Tax v. Commonwealth Trust Limited, (1982) 135 l.T.R. 19)
    for our acceptance. The counsel for the assessee, however lay stress upon
    the language of the sub-clause, to wit, upon the words any expenditure
    incurred for providing a benefit etc. to an employee. They also emphasise
    the words 'whether convertible into money or not" following the words "any
G   benefit or amenity or perquisite''. Their submission is that what is whithin
    the mischief of the sub-clause is an expenditure incurred for providing a
    benefit, amenity or perquisite to an employee and that a cash payment to
    the employee is not an "expenditure" contemplated by the sub-clause. They
    submit that the use of the qualifying words "whether convertible into money
    or not' puts the matter beyond doubt. They also submit that almost all the
H
                                   ~- ----~   -- - - - - -------,-------~~---------




     '
             Cl.T. v. MAFATLAL GANGABllAI AND CO. [B.P. JEEVAN REDDY,J.l          '137

         High Courts in the country have accepted this submission.                       A
               On a consid~ration of both the points of view, we are inclined to

'        agree with the submission of the learned counsel for the assessees. The
         language employed in the sub-clause v of clause (a) of section 40 of the
         Income tax Act 1961 is not capable of taking within its ambit cash payments
         made to the employees by the assessee. These cash payments will, of             B
         course, be treated as salary paid to the employees and will be subject to
         the limits/ceiling, if any, in that behalf. But they cannot be brought within
         the purview of the words "any expenditure which results directly or in-
         directly in the provision of any benefit or amenity or perquisite" - more so
         because of the following words "whether convertible into money or not".
                                                                                         c
                Now, corning to Section 40-A(S), the position is no different. Jt
         would, however, be appropriate to point out the distinction between Sec-
         tion 40(a)(v) and Section 40-A(S). We shall refer to the former provision
         as "sub-cla!lse' and the latter provision as 'sub-section'. The provision of
         sec. 40A(5) is wider in its scope and application than the sub-clause.          D
,.
         Sub-clause (i) of clause (a) of sub-section (5) deals with "any expenditure
         which results direcily or. indirectly in the payment of any salary to an
         employee or a former employee'. Sub-clause (i) of clause (c) of sub-section
         (5) sets out the limits/ceilings on such expenditure while clause (a) Of
         ExPlanation (2) appended to the sub-section defines the expression "salary"
         for_ the purposes of thiS sub-section. These features were absent in sub-       E
         clause (v) of Section 40(a). Now, coming to sub-clause (ii) of clause (a) of
         sub-section (5) - which correspo!lds to Section 40(a)(v) - it uses only one
         expression "perquisite' as against Section 40(a)(v) which spoke of "benefit
         or amenity or perquisite', but this is no real distinction because the
         definition of 'perquisite' in clause (b) of Explanation (2) to the sub-section F
         takes in both benefits and amenities. The said definition also include inter
         alia 'payment by the assessee of any sum in respect of any obligation w.hich
         but for such payment, would have been payable by the employee' - words
         which are found in the main limb of Section'40(a)(v) but which are missing
          in the main limb of sub-clause (ii) of clause (a) of sub-section (5). Thus,
          except for certain structural changes, Section 40-A(S)(a)(ii) and Section G
          40(a)(v) are similar in all material aspects. It, therefore, follows that what
          we have said with respect to Section 40(a)(v) applies equally to Section 40-
           A(S)(a)(ii).                                                                   •
                There still remain the words 'including any sum paid by the assessee     H
                                                                                    \
    238                   SUPREME COURT REPORTS                  [1996] 3 S.C.R.

A   in respect of any obligation which but for such payment would have been
    payable by such employee" in Section 40(a)(v) and similar words found in
    Section 40-A(5)(a)(ii) as well, i.e. in sub-clause (iv) of the definition of
    "perquisite" in clause (b) of Explanation (2) to sub-section (5). What do       '   .
    they mean ? The words "including any sum paid by the assessee in respect
B   of any obligation which but for such payment would have been payable by
    such employee" in section 40(a)(v) as well as in section 40-A(5)(a)(ii)
    contemplate a situation where the assessee makes a payment (in cash) in
    respect of an obligation - obligation of the employee - which would have
    been payable by the employee if it is not paid by the assessee. The payment
    by the assessee contemplated by these wouds is not evidently a payment to
C   the employee but to a third party, no doubt on account of the employee.
    Sub-clause (v) of the definition of "perquisite" in clause (b) of Explanation
    (2) to sub-section (5) also refers to cash payment but that too is not to the
    employee, though undoubtedly for his benefit.


D         For the above. reasons, we hold that cash payments by an assessee
    to his/its employees do not fall within the ambit of Section 40(a)(v) or
    Section 40-A(5)(a)(ii), as the case may be. We disagree with the opinion
    of the Kerala High Court in Commonwealth Tmst Limited (supra) and
    agree with the other High Courts which have taken a view according with
E   our view, viz., Commissioner of Income Tax, Kamataka v. Mysore Commer-
    cial Union Limited, (1980) 126 LT.R. 340 (Karnataka), Commissioner of
    Income Tax v. Shriram Regrigeration Industries Limited, (1992) 197 I.T.R.
    431 (Delhi), Commissioner of Income Tax v. Kanan Devan Hills Produce
    Company Limited (1979) 119 I.T.R. 431 (Calcutta), Commissioner of In-
    come Tax v. Indokem Private Limited, (1981) 132 I.T.R. 125 (Bombay),
F   Commissioner of Income Tax v. Warner Hindustan Limited, (1984) 145
    I.T.R. 24 (Andhra Pradesh), Instalment Supply Private Limited v. Commis-
    sioner of Income Tax, (1984) 149 I.T.R. 457 (Delhi), Commissioner of
    Income Tax v. Manjushree Plantations Limited, (1980) 125 l.T.R. 150
    (Madras) and Commissioner of Income Tax v. New India Industries Limited,
G   (1993) 201 l.T.R. 208 (Gujarat).


          AcCQrdingly, the appeals are dismissed. No costs.


H R.A.                                                       Appeals dismissed.