C.W.S. (INDIA) LIMITED versus THE COMMISSIONER OF INCOME TAX

Citation: [1994] 2 S.C.R. 247 · Decided: 01-03-1994 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Dismissed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

I 
C.W.S. (INDIA) LIMITED 
A 
•, 
v. 
THE COMMISSIONER OF INCOME TAX 
MARCH 1,1994 
(B.P. JEEVAA REDDY AND B.L. HANSARIA, JJ.) 
B 
Income tax Act, 1961: Sections 40{c)(iii), 40(a)(v) & 40A(5)-Section 
40( a)(v) in force upto 31-3-1972:-Section 40A(5) substituted with effect from 
1.4.1972-lnterpretation of the provisiort-Amenities or perquisites to 
employees beyond a particular limit-Disallowance of-Whether valid. 
c 
Intepretation of Statutes: Objects of all the rules of interpretation is to 
give effect to the object of the enactment having regard to the language 
useiJ-lntepretation not a mechanical exercise. 
Section 40(a)(v) of the Income tax Act, 1961 was in force till D 
31.3.1972. It was substituted by Section 40A(S) with effect from 1.4.1972. 
• 
Both provisions were substantially similar. The two provisions were In 
force successively form April 1,1963 to March 31,1989. These provisions 
were enacted with a view to discourage the assessees from Incurring 
expenditure which resulted directly or lmdirectly In the provision of any 
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benefit, amenity or perquisite to their employees beyond a particular llmlL 
Any expenditure beyond the prescribed llmite was disallowed. 
In the present appeals, such disallow were challenged, raising ques· 
tions relatlug to the interpretation of Section 40(11)(v) 
Dismissing the appeals, this Court 
F 
HELD: 1.1. While literary construction may be the general rule in 
construing taxing enactments, it d0t:• not mean that It should be adopted 
even if it leads to a discriminatory or incongrous result. Interpretation of 
statutes cannot be a mechanical exercise. Object of all the rules of inter· G 
pretatlon is tb give effect to the object of the enactment having regard to 
the language used. (254-E) 
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1.2. Section 40(a){v) of the Income tax Act, 1961 is only and expanded 
version of Section 40(c)(iii). The idea was to bring the allowances in 
respect of the assets owned by the assessee, which assets are used by its H 
247 
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248 
SUPREME COlJRT Rl'POHIS 
(1994)2 S.C.R. 
A 
employee for his own purposes or benefit, within the net or ceiling. Section 
40(c)(iii) did not cover such allowances and this was sought to be 
remedied. The idea was certainly not to bring about a different treatment 
of two situations In Section 40(a)(v). The consequence of accepting the 
assessee's interpretation would be that while tile ceiling un expenditure 
B 
c 
would apply to a certain case, no such ceiling would apply to certain other 
cases. The consequence would not only be discriminatory but also very 
incongruous, almost absurd. In principle, there is no distinction between 
the two cases or the two situations, as they may be called. Mere use of the 
word 'such" should not have the effect of driving the court to place an 
interpretation upon the said clause which is not only discriminatory but 
is highly incongrous. [254-A-D] 
Commissioner of Income-tux, Kera/a-I v. Travancore Tea Estates Co. 
Ltd., 122 I.T.R. 557, approved. 
Commissioner of Income-Tax v. Forbes, Ewart and Figgies( P) Ltd., 138 
D I.T.R.1, disapproved. 
E 
F 
G 
Maxwell's 'Interpretation of Statutes' (12th Edn.), referred to. 
2. So far as Section 40A(5) is concerned, controversy does not and 
cannot arise for the reason that the second part of clause (ii) in sub-section 
(5) does not use the words "such employee" but uses the words "an 
employee". It is not without signigificance that while substantially repeating. 
the provision in Section 40(a)(v) in Section 40A(5)(a)(ii), the Parliament 
bas taken care to substitute the word "such' with the word "an". [255-F] 
3. Both Sections 40(a) (v) and 40(5) (a) (ii) speak of "any allowance in , 
respect of any assets of the assessee used by an employee". The asset may 
be a building, a car, a refrigerator or an air-conditioner or any other asset. 
The allowance in respect of such assets certainly means and includes 
depreciation allowance on such assets. [255-H; 256-A] 
4. In respect of the other question urged viz. that amount expended 
on repairs is not includible in the expenditure referred to in Sections 
4ll(a)(v) and 40A(5)(a)(ii), it does not appear from the order of the High 
Court that the said question was either referred to it or was answered by ' 
it. Therefore, this Court declines to go into the said question. However, in 
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respe<'l of this question the relevant appeals shall subsist and shall be 
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C.W.S. LTD. v. C.1.T. (JEEVAN REDDY,J.] 
249 
heard along with 

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