PETITIONER: <NAME> Vs. RESPONDENT: ISHWAR SINGH PUNlA DATE OF JUDGMENT22/08/1988 BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) RANGNATHAN, S. CITATION: 1988 AIR 2031 1988 SCR Supl. (2) 528 1988 SCC (4) 284 JT 1988 (3) 745 1988 SCALE (2)658 CITATOR INFO : E&F 1990 SC 897 (11,14) RF 1992 SC 573 (33) ACT: Haryana Urban [Control of Rent and Eviction] Act, 1973: Sections 1 [3] and 13 [1]-Exemption from applicability of Rent Control Act-Period of 'ten years' exemption-Expiring during pendency of eviction suit-Effect of-Once rights crystallise adjudication to be in accordance with law. % Statutory Constitution: Purposive interpretation in a social amelioration-An imperative of anything else. Words and Phrases:'Actus curiam neminem gravabit'- Meaning of. HEADNOTE: The appellant-landlord filed a civil suit against the respondent-tenant for possession of a shop which had been rented out by him in 1978. The suit was filed on the basis that the respondent was in arrears of rent from lst December, 1981 to 31st May,1982, that the tenancy had been terminated by giving a suit notice, and that section 1(3) of the Haryana Urban (Control of Rent and Eviction) Act , 1973_exempted the building from the purview of the Act. On or about 15th February, 1983, the respondent-tenant filed his written statement, and in November, 1984, moved an application for dismissal of the suit stating that the shop in question was constructed in June 1974 and as such, the period of 10 year had elapsed by June 1984 in terms of section 1  of the Act and as such, the immunity from the application of the Act having expired, the suit under the Act is not maintainable, and that the jurisdiction of <ORG> was barred. The Sub-Judge held that the decree was not necessary, to be passed within the exemption period of 10 years under section 1 (3) of the Act, and accordingly dismissed the respondent's application. The respondent preferred a revision petition to <ORG> , which held that as the suit had not been decreed within the period of 10 years, the building in question came within the operation of the Act and as such, PG NO 528 PG NO 529 the rent Act was applicable and <ORG> had no jurisdiction. <ORG> allowed the petition and consequently dismissed the suit pending before the Sub- Judge. The landlord appealed to this <ORG> by Special Leave. Allowing the appeal and remanding the case, HELD: l.(a) The rights of the parties will have to be determined on the basis of the rights available to them on the date of the suit. The Judgment and Order of <ORG> set aside, and order of the Sub-Judge restored. The suit to proceed in accordance with law. {533G-535F] (b) Section 13 of the Act provides that the tenant in possession of a building or a rented land shall not be evicted therefrom except in accordance with the provisions of the said Section. Those provisions world not be applicable under Section 1(3) to a suit instituted within 10 years from the date of the completion of the building in question. {534B} (c) It is well-settled that no man should suffer because of the fault of the <ORG> or delay in the procedure. "Actus curiam neminem gravabit''-an act of <ORG> shall prejudice no man. [534E] (d) Having regard to the time normally consumed for adjudication, the 10 years exemption or holiday from the application of the Rent Act would become illusory, if the suit has to he filed within that time and be disposed of finally. [534F] (e) It is common knowledge that unless a suit is instituted soon after the date of letting, it world never be disposed of within 10 years and even then within that time it may not be disposed of. That will make the 10 years holiday from the Rent Act illusory and provide no incentive to the landlords to build new holiday to solve problem of shortages of houses. The purpose of the legislation would thus be defeated. [534G] (f) Bearing in mind the well-settled principle, that the rights of parties crystallise on the date of the institution of the suit, the meaningful construction must be that the exemption world apply for a period of 10 years and will continue to be available until the suit is disposed of or adjudicated. Such suit or proceedings must be instituted within the stipulated period of 10 years. Once rights crystallise the adjudication must be in accordance with law. [535E] PG NO 530 <CITATION> ,  3 S.C.C. 352; <CITATION> ,  4 S.C.C. 382; <CITATION> . Vijendrapal Gupta,  3 S.C.R. 491; <CITATION> ,  3 S.C.C. 452, referred to. 2.(a) Purposive interpretation in a social amelioration legislation is an imperative irrespective of anything else. [534G] (b) Judicial time and energy is more often than not consumed in Finding what is the intention of the <ORG> or in other words, the will of the people. The fairest and most rational method to interpret the will of the legislator is by exploring his intentions at the time when the law was made, by signs most natural and probable and these signs are either the words, the context, the subject matter, the effects and consequences or the spirit and reasons of the law. [534H-535A] (c) Each word, phrase or sentence has to be construed in the light of the purpose of the Act itself but words must be construed with imagination of purpose behind them. Though the <ORG> is concerned with seeking of intention, it is rather looking to the meaning of the word that the legislator has used and the true meaning of the words used. {535B} <CITATION> , [1953} SCR 677 and <ORG> v. <ORG>, {1975] A.C. 591 at 613. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3081 of 1988.

From the Judgment and Order dated 25. 10. 1985 of <ORG> in Civil Revision No. 2457 of 1985.

<NAME> and Ms. <NAME> for the Appellant. <NAME> and <NAME> for the Respondent. The Judgment of the Court was delivered by <NAME>, <NAME> Special leave granted. The appeal is disposed of herein after hearing counsel for both the parties.

The appellant-landlord filed a suit for possession in <ORG> in Haryana. The respondent is the tenant in the shop situated at Raj Guru Market which had PG NO 531 been rented out to the respondent in 1978. The suit was filed on the basis that the respondent was in arrears of rent from lst December, 1982 to 3lst May, 1982 and the tenancy of the respondent had been terminated by giving him notice. The suit was filed for recovery of possession on the termination or expiry of the period of tenancy. It was filed because of Section 1(3) of the Haryana Urban (Control of Rent and Eviction) Act , 1973 (hereinafter referred to as 'the Act'). The Act was passed with the object to control the increase of rent of certain buildings and rented land situated within the limits of urban areas and the eviction of tenants therefrom. For our present purpose, it would suffice if we bear in mind two relevant provisions. Section 1(3) of the Act provides as follows :

"Nothing in this Act shall apply to any building the construction of which is completed on or after the commencement of this Act for a period of ten years from the date its completion. "

Section 13 of the Act deals with the eviction of tenants and sub-section (1) thereof provides that the tenant in possession of a building or a rented land shall not be evicted therefrom except in accordance with the provisions of that section. The section thereafter enumerates the statutory grounds for eviction upon which eviction is permitted which incidentally are more or less similar statutory ground all over the country.

On or about 15th February, 1983, the respondent-tenant filed his written statement. In November, 1984, the respondent-tenant moved an application for dismissal of the suit of the appellant stating that the shop in question was constructed in June, 1974 as such the period of ten years had elapsed by June, 1984 in terms of section l(3) of the Act. and, as such, the immunity from the application of the had expired. The suit under the Act is not maintainable and the Jurisdiction of <ORG> stands barred. The learned Sub-Judge, <NAME>. held that the decree was not necessary to be passed within the exemption period of ten years under section 1(3) of the Act. the learned Sub-Judge accordingly dismissed the respondent's application. Aggrieved thereby, the tenant-respondent preferred a revision to <ORG> and Haryana. <ORG> held that as the suit had not been decreed within the period of ten years, the building in question came within the operation of the Act and as such the Rent Act was applicable and <ORG> had no jurisdiction. In the PG NO 532 premises, the learned Judge of <ORG> dismissed the suit pending before the Sub-Judge. Aggrieved thereby the appellant has come up in appeal to this Court. More or less identical provisions of the U. P. Act had come up for consideration before this Court in the case of <CITATION> , [l984] 3 S.C.C. 352. The only point that was urged before this Court in that decision was whether the premises which was not ten years' old on the date of the suit and was exempted from the operation of the new Rent Act , could be governed by it if ten years expired during the pendency of the litigation. The relevant provisions of the U.P. Urban Buildings (Regulation of Letting, Rent and Eviction) Act , 1972 provided as follows:

"20. Bar of suit for eviction of tenant except on specified grounds. (1) Save as provided in sub-section [2). no suit shall be instituted for the eviction of a tenant from a building, notwithstanding the determination of his tenancy by efflux of time or on the expiration of a notice to quit or in any other manner.

Provided that nothing in this sub-section shall bar a suit for the eviction of a tenant on the determination of his tenancy by efflux of time where the tenancy for a fixed term was entered into by or in pursuance of a compromise or adjustment arrived at with reference to a suit, appeal, revision or execution proceeding, which is either recorded in court or otherwise reduced to writing and signed by the tenant."

<CITATION> , [supra], the respondent-landlord filed a suit for eviction and for arrears of rent and damages, inter alia, on the grounds that the building in question was not covered by the U.P. Urban Buildings [Regulation of Letting, Rent and Eviction] ct, 1972 in view of the exemption granted to new buildings under section 2  of the said Act and that the defendant- appellant had defaulted in payment of rent. The tenant had resisted the claim on the ground that having regard to the date of construction of the building, it was covered' by the Act, that the plaint having not been amended so as to bring the suit under the Act, it was barred by section 20 and that term was no default in payment of rent. As mentioned hereinbefore, during the pendency of the litigation the exemption granted under section 2  expired. The question was whether the premises which was not ten years' old on the PG NO 533 date of the suit and was exempted from the operation of the Rent Act , would be governed by it if ten years expired during~, the pendency of the litigation. Allowing the appeal, this Court held that the appellant must get benefits of the Act which became applicable to the premises in question during the pendency of the litigation. That would not affect the cause of action in that case. It was held that the contention that the Court had to decide the case on the basis of cause of action that accrued prior to the date of filing the suit and not on a new cause of action was not sustainable. It was further held that normally amendment in plaint is not allowed if it changes the causes of action. However, where the amendment does not constitute an addition of a new cause of action, or raise a new case, but amounts to no more than adding to the facts already, on the record, the amendment would be allowed even after the statutory period of limitation. This Court observed that processual justice required that the events and developments subsequent to the institution of proceedings must be taken into consideration in appropriate cases to promote substantial justice. <NAME> case (supra] was discussed and explained by this Court in Nand Kishore Marwah und <CITATION> ,  4 S.C_'.C. 382. This Court held that in view of section 2(2) of the 1972 Act, if an assessment is made of the newly built house then the date of completion of the building, the date from which 10 years have to be computed will be the date on which the first assessment was made. Therefore, the period of 10 years have to be computed from October. 1976. This Court further hold that if a tenant is entitled to the advantage of sections 39 and 40 of the Act and the period of 10 years elapses during the pendency of the eviction suit or appeal before this Court (which is the continuation of the suit), then the tenant would be entitled to the benefits of the Act. This Court further held that within 10 years as provided for in section 2(2) restriction on the institution of suit as provided for in section 20 (1) will not be applicable. It was held that during the pendency of the litigation even if 10 years expired the restriction under section 20 will not be attracted as the suit had been instituted within 10 years. It is well-settled that the rights of the parties will have to be determined on the basis of the rights available to them on the date of the suit. This Court pointed out that the attention of the Court had not been drawn to the decision of this Court in <CITATION> . <NAME>,  3 S.C.R. 491. This Court referred to the words used in section 20 of the said Act which emphasised that "no suit shall be instituted for eviction." 'This clearly indicates that the restriction put under section 20 of the said Act is to the institution of the suit itself and, therefore, it is clear that if the provision of PG NO 534 this Act applies then no suit for eviction can be instituted except on the grounds specified in the sub-sections of that section of the Act. This applies more so in the instant case where the section 13 of the Act provides that the tenant in possession of a building or a rented land shall not be evicted therefrom except in accordance with the provisions of this section. Those provisions would not be applicable to a suit instituted within 10 years from the date of the completion of the building in question. That is the plain meaning of the expression "use". It was further to be borne in mind that in finding out the plain meaning of the expression "use"z the language, the background, the context, the purpose, these all have to be borne in mind. <CITATION> ,  3 S.C.C. 452, <NAME>, J. has explained the section 2(2) of the U. P. Act as follows ;

"The legislature found that rent control law has a chilling effect on new building construction, and so, to encourage more building operations, amended the statute to release, from the shackle of legislative restriction, 'new constructions' for a period of ten years. So much so, a landlord who had let out his new building could recover possession with-out impediment if he instituted such proceedings within ten years of completion ?' It is well-settled that no man should suffer because of the fault of the <ORG> or delay in the procedure. <NAME> has stated the maxim "actus curiam neminem gravabit"-an act of <ORG> shall prejudice no, man. Therefore, having regard to the time normally consumed for adjudication, the 10 years exemption or holiday from the application of the Rent Act would become illusory, if the suit has to be filed within that time and be disposed of finally. It is common knowledge that unless a suit is instituted soon after the date of letting it would never be disposed of within 10 years and even then within that time it may not be disposed of. That will make the 10 years holidays from the Rent Act illusory and provide no incentive to the landlords to build new houses to solve problem of shortages of houses. The purpose of legislation would thus be defeated. Purposive interpretation in a social amelioration legislation is an imperative irrespective of anything else. Judicial time and energy is more often than not consumed in finding what is the intention of the <ORG> or in other wards, the will of the people. <NAME> tells us that the fairest and most rational method to interpret the will of the legislator is by exploring his inten tions at PG NO 535 the time when the law was made, by signs most natural and probable. And these signs are either the words, the context, the subject matter, the effects and consequence, or the spirit and reason of the law. (Underlined by the <ORG>). See Commentaries on the Laws of England (facsimile of lst edition of 1765, <ORG>, 1979 Vol. 1, p. 59). <NAME>, J. as the learned Chief justice then was, in <CITATION> ,  SCR 677 said that each word, phrase or sentence was to be construed in the light of purpose of the Act itself. But words must be construed with imagination of purpose behind the said Judge <NAME>, long time ago. It appears, therefore, that though we are concerned with seeking of intention, we are rather looking to the meaning of the words that the legislator has used and the true meaning of what words as was said by Lord <NAME> in <ORG> v. <ORG>,  Appeal Cases 591 at 613. We are clearly of the opinion that having regard to the language we must find the reason and the spirit of the law. If the immunity from the operation of the Rent Act is made and depended upon the ultimate disposal of the case within the period of exemption of 10 years which is in reality ability, then there would be empty reasons. In our opinion,bearing in mind the well-settled principle that the rights of the parties crystallise on the date of the institution of the suit as enunciated by this <ORG> in <CITATION> , (supra), the meaningful construction must be that the exemption would apply for a period of 10 years and will continue to be available until suit is disposed of or adjudicated. Such suit or proceeding must be instituted within the stipulated period of 10 years. Once rights crystallise the adjudication must be in accordance with law.

In that view of the matter, we are of the opinion that <ORG> was in error in the view it took. The judgment and order of <ORG> are set aside and the order of the learned Sub-Judge is restored. The suit will now proceed in accordance with law in the light of the observations herein as expeditiously as possible. The costs of the appeal will be the costs of the suit.

N.V.K. Appeal allowed.


PETITIONER: <ORG> Vs. RESPONDENT: STATE OF MADHYA PRADESH DATE OF JUDGMENT: 25/07/1996 BENCH: <NAME>: <NAME>, A.S. (J) CITATION: JT 1996 (6) 652 1996 SCALE (5)467 ACT: HEADNOTE: JUDGMENT:

THE 25TH DAY OF JULY, 1996 Present :

Hon'ble Dr. Justice <NAME> Hon'ble Mr. Justice <NAME> and <NAME>, Adv. for the appellants. <NAME>, Adv. for the Respondent J U D G M E N T The following Judgment of the Court was delivered: <NAME>

State of Madhya Pradesh (With Criminal Appeal No. 252 of 1984) J U G M E N T THOMAS, J.

A youngman, by name <NAME>, was murdered on 23.8.1980, near Government Degree College Dhar. The police arraigned five persons for the said murder and the Sessions Judge, after trial, convicted the first two among them (<NAME>-first accused and <NAME> second accused) of the offence under Section 302 , and acquitted the remaining three persons. State filed an appeal challenging the acquittal and the convicted persons filed another appeal. <ORG> of Madhya Pradesh while confirming the conviction and sentence reversed the order of acquittal of 5th accused (<NAME> and convicted him also of the offence under Section 302 . Sentence of imprisonment for life was awarded to all the convicts. We have before us two appeals by special leave, one jointly filed by <NAME> and <NAME> and the other separately filed by <NAME>.

Prosecution set up the following case against five accused. Around 3.30 P.M. deceased <NAME>, PW-1 <NAME> and PW-5 <NAME> were proceeding on bicycles along Dhar-Indore Road. Their cestination was <NAME>'s house at Jetpura. As they reached near <ORG>, all the five accused emerged from the roadside and made a blits on <NAME>. <NAME> and <NAME> were armed with Dhariya. 3rd accused had a pistol and 4th and 5th accused (<NAME>) had sickles with them. Deceased tried to escape but was again attacked by the assailants with their cutting weapons. PW-1 and PW-5 cried for help and thus <NAME> Peon of the College rushed to their rescue. But by then <NAME> had sustained a number of serious wounds on his head and he fell down dead at the spot itself.

Sessions court framed a charge against the accused for offences under Sections 302 and 148 read with Section 149 of the Indian Penal Code. The accused denied having participated in the occurrence. After trial learned sessions Judge concluded that prosecution has failed to prove that there was an unlawful assembly, but found that <NAME> (first accused) and <NAME> (second accused) have inflicted cut injuries or the deceased with Dhariyas and convicted them under Section 302  and sentenced them each to imprisonment for life.

Out of the four eye witnesses examined by the prosecution <NAME> (PW-4) did not support the case and the other three witnesses spoke to the prosecution version. Learned sessions Judge found the evidence of <NAME> (PW-6) quits acceptable and hence the conviction was based on his testimony. Nonetheless the trial judge was not inclined to convict <NAME> (5th accused) on the strength of the evidence of <NAME> (PW-6). Evidence of the other eye witnesses was found to be not very reliable.

<ORG> on a re-evaluation of the evidences felt that the trial court to have placed reliance on the testimony of <NAME> (PW-1) and <NAME> (PW-5) also. Learned judges expressed the view that sessions judge has given undue importance to certain discrepancies and contradictions noted in their evidence. This is what the <ORG> said about it:

"The discrepancies and contradictions are not in regard to the fact that the accused participated in the incident put in regard to the sequence of events and minor and inconsequential details of the occurrence and other collateral facts which do not make their testimony untrustworthy."

Thus relying on the evidence of PW-6 (Naruram) as corroborated by PW-1 and PW-2 <ORG> found <NAME> also guilty of murder and convicted him and sentenced him as aforesaid.

Learned counsel for the appellants contended that <ORG> committed a basic error in seeking the aid of Section 34  for confirming the conviction of the appellants for the offence under Section 302 . So long as the charge framed against them did not mention Section 34 of . <ORG> was not Justified in using the said provision for convicting the appellants, according to the learned counsel.

<ORG> found that there was no unlawful assembly as the strength of the assembly was insufficient to constitute it into "unlawful assembly". But if the court enters upon a finding that any of the remaining persons who participated in the crime had shareo common intention with the main perpetrators of the crime, the court is not helpless in seeking the aid of Section 34 () to enter a conviction against such persons arraigned as accused. This is despite the difference between the scops of Section 34 and Section 149 , yet they have some resemblance between each other and are to some extent overlapping ( <CITATION> , 1925 PC 1).

Legal position on this aspect remained uncertain for a time after this court rendered a decision in <CITATION> . 1955 (1) SCR 1201. But the doubt was cleared by a constitution bench of this court in <CITATION> ., AIR 1956 SC 116. Where this court observed at para 86, thus:

" Sections 34 , 114 and 149 of the Indian Penal Code provide for criminal liability viewed from different angles as regards actual participants, accessories and men actuated by a common object or a common intention: and the charge is a rolled-up one involving the direct liability and the constructive liability without specifying who are directly liable and who are sought to be made constructively liable. In such a situation, the absence of a charge under one or other of the various heads of criminal liability for the offence cannot be said to be fatal by itself, and before a conviction for the substantive offence, without a charge, can be set aside, prejudice will have to be made put. In most of the cases of this kind, evidence is normally given from the outset as to who was primarily responsible for the act which brought about the offence and such evidence is of course relevant."

It is, therefore, open to the court to take recourse to Section 34 of  even if the said section was not specifically mentioned in the charge and instead Section 149  has been included. Of course a finding that the assailant concerned had a common intention with the other accused is necessary for resorting to such a course. This view was following by this court in later decisions also, ( <CITATION> . AIR 1973 SC 2221. <CITATION> or Punjab, AIR 1974 SC 1256). The first submission of the learned counsel for the appellant has no merit.

While dealing with the case of appellant <NAME>, we may point out that <ORG> chose to believe the evidence of PW-1 and PW-2 and found that their evidence supports the testimony of PW-6 who said that <NAME> was also a participant in the crime. In this context it is to be remembered that learned sessions judge was disinclined to convict <NAME> because PW-6 Naruram did not mention anything about <NAME> in his statement recorded under Section 161 of the Code of Criminal Procedure for short the Code ). When cross- examined, PW-6 was asked this omission and he had no explanation to offer. PW-14, the Investigating Officer who interrogated PW-6, had stated that <NAME>'s name was not mentioned by <NAME> (PW-6) when the latter was questioned during investigation. Learned sessions Judge found it difficult to convict accused <NAME> on the above evidence of PW-6, but the <ORG> chose to act on the said evidence. Learned counsel for the appellant -<NAME> seriously assailed the aforesaid course adopted by the <ORG> and contended that it is not open to the appellant court to interfere with the finding made by the trial court in favour of an accused so lightly as that. Learned counsel further contended that in an appeal against acquittal there must be compelling reasons to disturb a fact finding made by the trial court and that unless the view of the trial court is perverse or at least unreasonable no interference shall normally be made.

Though the Code does not make any distinction between an appeal from acquittal and an appeal from conviction so far as powers of the appellate court are concerned, certain unwritten rules of adjudication have consistently been following by Judges while dealing with appeals against acquittal. No doubt, <ORG> has full power to review the evidence and to arrive at its own independent conclusion whether the appeal is against conviction or acquittal. But while dealing with an appeal against acquittal the appellate court has to bear in mind: first, that there is a general presumption in favour of the ignorance of the person accused in criminal cases that presumption is only strengthened by the acquittal. The second is, every accused is entitled to the benefit of reasonable doubt regarding his guilt and when the trial court acquitted him. He would retain that benefit in the appellate court also. Thus, appellate court in appeals against acquittals has to proceed more cautiously and only if there is absolute assurance of the guilt of the accused, upon the evidence on record, that the order of acquittal is liable to the interfered with or disturbed. ( <CITATION> , AIR 1966 SC 1775, <CITATION> . Goa, AIR 1977 SC 135, <CITATION> , AIR 1987 SC 1083, <CITATION> . , AIR 1988 SC 1158, <CITATION> , AIR 1990 SC 2134).

Trial court which relied on the evidence of <NAME> (PW-6) pointed out that the witness did not refer to any role played by <NAME> when he gave statement to the police during investigation and hence a conviction for the offence of murder cannot be passed against <NAME> on the strength of improvement made at the trial. The said sound reasoning should not have been sidelined by <ORG> without providing sufficient and convincing reasons. None has been given. We have scrutinized the evidence and we too are satisfied that PW-6 <NAME> has, in fact, omitted to mention anything about <NAME> when PW-6 was questioned by police and has later on tried to give an improved version.

We are, therefore, of the opinion that the order of acquittal passed by the trial court in favour of <NAME> should have been maintained by <ORG>. So far as the case of <NAME> and <NAME> is concerned, the appreciation of evidence by the courts below is sound and proper. We agree with the findings recorded by the courts below and are of the opinion that their conviction and sentence are well merited. There is no merit in their appeal.

In the result, we dismiss Criminal Appeal No. 252/84 filed by <NAME> and <NAME>, but we allow Criminal Appeal No. 170A/84, filed by <NAME>. We set aside the conviction and sentence passed on <NAME> and restore the order or acquittal passed by <ORG> in his favour.


<NAME>, Accountant Member

1. This Special Bench was constituted to consider the question whether provisions of Section 40A(8) of the Income-tax Act, 1961 ('the Act') are applicable to assessment year 1976-77, irrespective of previous year followed by the assessee. A Bombay Bench had expressed the opinion that it would, while a Madras Bench had held that Section 40A(8) would apply only to expenditure on interest incurred after 1-4-1976.

2. The assessee-company manufactures Pharmaceuticals, drugs and milk products. Its accounting year ended on 30-6-1975 which is relevant for the assessment year 1976-77 (year under consideration). The <ORG> had disallowed under Section 40A(8) Rs. 3,11,040. The only discussion in the assessment order as per paragraph 10 is that (assessee) has correctly shown disallowance at the rate of 15 per cent of Rs. 20,73,598 (out of interest paid) amounting to Rs. 3,22,040. Before the Commissioner (Appeals), the assessee raised an additional ground challenging the disallowance under Section 40A(8) on the ground that Section 40A(8) , having been introduced with effect from 1-4-1976, would, therefore, be applicable to expenditure incurred on payment of interest on deposits from that date and not to interest paid prior to that date and as the assessee's previous year relating to the assessment year 1976-77 ended on 30-6-1975, provisions of Section 40A(8) were inapplicable to this year. The assessee relied on the Tribunal <ORG>ras Bench 'D' decision in A.P.P. Ltd. [IT Appeal No. 952 (<ORG>.) of 1980] for the assessment year 1976-77. The Commissioner (Appeals), without discussing the matter, rejected the assessee's contention and confirmed the <ORG>'s order.

3. At the hearing before us, the learned counsel for the assessee again relied on the aforesaid decision of the Tribunal Madras Bench 'D' and emphasized that provisions of Section 40A(8) operate only in respect of expenditure on interest incurred after 1-4-1976. In the <ORG> case, the accounting year ended on 30-4-1975, while in the case before us the accounting year ended on 30-6-1975. It was thus urged that the <ORG> decision squarely applied in the assessee's case.

4. The learned departmental representative urged that Section 40A(8) had been introduced by the Finance Bill, 1975 with effect from 1-4-1976-  98 ITR (St.) 129. He also referred to memorandum explaining the provisions of the Finance Bill, 1975 at  98 ITR (St.) 184 (paragraphs 9-11) where it was indicated that 'the proposed amendment will take effect from 1st April, 1976 and will accordingly apply in relation to the assessment year 1976-77 and subsequent years'. Similar were the observations under 'Notes on clauses' in  98 ITR (St.) 168. It was emphasized by the departmental representative that there was nothing in the aforesaid amendment or the Notes on clauses or in the memorandum to suggest that previous year had any relevance and that it was clear that disallowance of 15 per cent of the interest was to be made out of expenditure on interest incurred in the assessment year 1976-77 irrespective of different previous years followed by the diverse assessees. It was further urged that it was an elementary principle of income-tax law that the law to be applied is that in force in the assessment year and it is immaterial what previous year the assessee follows. It was urged that any amendment which is in force at the beginning of the relevant assessment year must govern the case after the income under assessment is earned. It was also urged that the <ORG> had given one year's advance notice of the applicability of the new provision [ Section 40A(8) ].

5. The revenue's case is supported by good authority. Kanga & Palkhivala in Law & Practice of Income-tax, Seventh edn., Vol. 1 at p. 83 under the head 'Law to be applied is that in force in assessment year' observed : "Though the subject of the charge is the income of the previous year, the law to be applied is that in force in the assessment year, unless otherwise stated or implied." These observations are based on <CITATION> 1.1951] 20 ITR 572, 577 (SC) and M.KR. Deivanayagam Pillai v. Second Addl. ITO  35 ITR 549, 551 (Mad.). The learned commentators further observed : "Any amendment which is in force at the beginning of the relevant assessment year must govern the case though the amendment is made after the income under assessment is earned. In other words, the Income-tax Act as it stands amended on the 1st April of a financial year must apply to the assessment for that year." These observations are again based on a number of decisions given in footnotes 12-13 on the same page. We will refer to these decisions later.

6. Similar are the observations by <NAME> in Law of Income-tax, Seventh edn., Vol. 1 at pages 450-451 under the head "14. Levy of charge according to the provisions of the Income-tax Act as they stand on the first day of April each year." The learned commentator, relying on <ORG> case (supra) observed that <ORG> pointed out that "It is a cardinal principle of the tax law that the law to be applied is that in force in the assessment year unless otherwise provided expressly or by necessary implication. But, it has been held, the subject of charge is not the income of the year of assessment, but the income of the previous year. As the Finance Act s come into force on the first day of April each year, therefore, the law to apply is the law in force at the commencement of the year of assessment, i.e., the first day of April each year." The commentator relied on <CITATION>  13 ITR 221 (PC) as also on <NAME> case (supra). The commentator further observed in the same para : "Thus, as a charge on the income of the previous year, the substantive law of that year must be applied." The commentator relied on <CITATION>  111 ITR 525 (Cal.). The commentator further observed that "applying the above rule, <ORG> in <CITATION> .  42 ITR 589 declined to allow retrospective operation to be given to fourth proviso to Section 10(2)(vii) inserted by the Income-tax (Amendment) Act , 1946 which had been brought into force on 5-5-1946".

7. Similar are the observations of <NAME> and <NAME> in Income-tax Law, Third edn., Vol. 1 at p. 193 under the head 'Law applicable to income-tax assessments'. These commentators have also relied on a number of decisions.

8. <ORG> in <ORG> case (supra) at p. 577 clearly observed : "The first question to be answered is whether these dates [1-4-1940 when amendment to Section 10(2)(vii) of the Indian Income-tax Act, 1922 took effect and 1-4-1939 mentioned in the amended proviso] are to apply to the accounting year or the year of assessment. They must be held to apply to the assessment year, because in income-tax matters, the law to be applied is the law in force in the assessment year unless otherwise stated or implied,"

9. Earlier, <ORG> in Maharajah of Pithapuram's case (supra) observed that under the express terms of Section 3 of the Indian Income-tax Act, 1922 ('the 1922 Act') the subject of charge is not the income of the year of assessment but the income of the previous year. In that case, Section 16(1)(c) of the 1922 Act, which was amended by the Income-tax (Amendment) Act , 1939, was held to apply to the assessment year 1939-40 although the subject of charge was the income of the accounting year 1938-39. Section 16(1)(c) applied to revocable transfers of assets- whether they were effected before or after the commencement of the Income-tax (Amendment) Act . The assessee by certain deeds of trust and settlement dated 5-4-1933 had settled properties on his daughters with a provision reserving to himself powers to revoke the settlements and the question was whether for the assessment year 1939-40, the income of accounting year 1938-39 derived from such assets was assessable under Section 16(1)(c) and the assessee urged that only transfers effected after 1-4-1939 were hit by Section 16(1)(c) but <ORG> repelled that contention and held that the law as amended would apply to the assessee.

10. To the same effect is the decision of <ORG> in CIT v. <ORG> [1940] 8 ITR 467 where it was held that law and statutory rules applicable for determining an assessment are the law and statutory rules in force for the year of assessment and not those which were in force during the (accounting) year the income of which is sought to be assessed. Thus, for the assessment year 1936-37, the <ORG> notifications of 2-11-1935 and 4-4-1936, limiting the exemption of interest on securities purchased through the post offices was applicable though the income assessable was for the accounting year ending 31-3-1936.

11. <CITATION>  9 ITR 137 (Pat.), the question was whether the provisions of Section 16(3)(a)(iii) inserted by Section 2 of the Income-tax (Amendment) Act, 1937 applied to the assessment year 1937-38 in respect of income from assets transferred by husband to his wife otherwise than for adequate consideration before 1-4-1937 and it was held that the said provision applied to the transfers made before 1-4-1937. The <ORG>, thus, repelled the contention that the amending Section would not apply to transactions entered into before the amendment.

12. There is thus a catena of decisions laying down, what has by now become a well established rule of interpretation, that any amendment which is in force at the beginning of the relevant assessment year must govern the case though the amendment is made after the income under assessment is earned in the accounting year which has since closed. <ORG> in <NAME> case (supra) followed the earlier decisions mentioned above and reaffirmed the said principle of construction of statutes. Similar view had been taken by <ORG> in <CITATION>  72 ITR 637.

13. <ORG> in <NAME> case (supra) while dealing with double taxation relief under India & Burmah Income-tax Relief Order, 1936, held that the law to apply to the claim of the assessee in this case was the law as it stood in the year of assessment, namely, 1947-48. It was observed that only where there was a change in law even within the course of the assessment year, it was the law in force at the commencement of the assessment year that should apply in the absence of any statutory provision to the contrary.

14. <ORG> in <CITATION>  84 ITR 661 observed that it was well recognized that specific dates in the 1961 Act and the Finance Act , 1955, had reference to assessment years and had nothing to do with the accounting years of an assessee which might differ from person to person. Thus, the amendment contained in the Finance Act was held applicable to the assessment year 1955-56.

15. <ORG> in <CITATION> .) Ltd.  119 ITR 830 observed at p. 834 that it was a well settled proposition in the income-tax law that in income-tax matters, the law to be applied is the law in force in the assessment year unless otherwise stated or implied. <ORG> followed the <ORG> decision in <ORG> case (supra).

16. <ORG> in <CITATION> ' 120 ITR 921 reiterated that it was a cardinal principle of tax law that the law to be applied is that in force in the assessment year unless otherwise provided expressly or by necessary implication. They followed their decisions in <ORG> case (supra) and <CITATION>  60 ITR 262 (SC).

17. <ORG> in <CITATION>  25 ITR 58 was considering the applicability of the Finance Act , 1950 to 'United States of Rajasthan' for the assessment year 1950-51 and they observed that the income for the assessment year 1950-51 became assessable to Indian income-tax in respect of the previous year 1949-50. They rejected the contention that as the Constitution of India had come into force only on 26-1-1950, the income of the previous year before 26-1-1950 was not taxable to Indian Income-tax. At page 70, they observed that "The case is thus one where the statute purports to operate only prospectively, but such operation has, under the scheme of the Indian Income-tax law, to take into account income earned before the statute came into force. Such an enactment cannot, strictly speaking, be said to be retroactive legislation, though its operation may affect acts done in the past.

18. <ORG> in <ORG>'s case (supra) observed : "It is well settled that the Income-tax Act as it stands amended on the first day of April of any financial year must apply to the assessment of that year." However, dealing with amendment coming into force after 1st April, they observed "Any amendments in the Act which comes into force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment is actually made after the amendments come into force." <ORG> explained that its earlier decision in <ORG> case (supra) had laid down that the amended Act as on 1st April applied to assessment year and accounting year had no relevance and that though subject of charge was income of the previous year, law to be applied was that in force in the assessment year.

19. <ORG> in <NAME> CIT were dealing with the assessability to capital gains of sale of ornaments in the financial year 1972-73 in view of amendment of Section 2(14)(ii) of the Act made effective from 1-4-1973 by including jewellery in the definition of 'capital assets'. Question before the Court was whether the said amendment governed the assessment year 1973-74. Following <ORG> case (supra), <ORG> held that the sale of jewellery in the financial year 1972-73 was assessable in the assessment year 1973-74. <ORG> thus rejected the assessee's contention that as the sale of jewellery was made before the amendment, the amendment did not apply to his case.

20. In <NAME> v. <ORG> [1973] 91 ITR 513 (Mad.), while dealing with voluntary disclosure under the Finance (No. 2) Act, 1967, <ORG> observed that it was a well settled rule of interpretation that in construing the scope of legal fiction, it would be proper and even necessary to assume all those facts on which alone the fiction can operate and a construction which defeats the very object sought to be achieved by the <ORG> must, if possible, be avoided.

21. Applying the aforesaid ratio to the facts of the case before us, the <ORG> having declared that Section 40A(8) would operate from the assessment year 1976-77, it has to be assumed as a necessary corollary that the said Section would operate for the previous year relevant for the assessment year 1976-77 and to hold that the said Section would operate only in respect of expenditure incurred on or after 1-4-1976, as contended by the assessee, would nullify the <ORG>'s intention to apply the said Section with effect from the assessment year-1976-77. We may observe that arguments advanced regarding interpretation of Section 64 of the Act, similar to those urged before us by the assessee-company, that the taxing provisions would apply only prospectively and would not affect transactions already completed, were rejected in a number of decisions where it was held that Section 64(1) concerns the income from transferred assets and not the date of transfer and if the income from transferred assets (to the wife or minor child without adequate consideration) arose in the accounting year relevant to the assessment year, the income was assessable. A number of cases are enumerated at page 1835 of Chaturvedi and Pithisaria's Income-tax, Third edn., Vol. 2. Similar are the observations at p. 2379 of <NAME> Law of Income-tax, Seventh edn., Vol. 3.

22. In this context, we have to refer to <CITATION> .) Ltd.  76 ITR 84 (Cal.) on which the assessee has relied in support of his proposition that only the law in force in the accounting year should be applied. In that case, the company's accounting year had ended on 30-6-1959 and it had declared dividend in March 1960 when the statutory percentages of total income under Section 23A of the 1922 Act for declaration of dividend (within 12 months of close of previous year) were 45 per cent in the case of manufacturing, processing, etc. and 60 per cent in the case of trading. However, by Section 11 of the Finance Act, 1959, the said statutory percentages were amended to 50 per cent and 65 per cent respectively, with effect from 1-4-1960.

23. The controversy was whether the revised percentages would apply in the assessee's case in respect of assessment year 1960-61 for which the <ORG> had made the assessment on 17-3-1961. <ORG> held that as the dividend was to be declared within 12 months following the expiry of the previous year, the statutory percentages operative in the previous year only have to be considered and not the revised percentages. The <ORG> came to this conclusion on analysing the language of Section 23A as well as the amendment introduced by the Finance Act , 1959 which, according to <ORG>, intended the revised percentages to be applicable only prospectively from 1-4-1960. The <ORG> further observed that tax cannot be levied by implication. The <ORG>, therefore, was of the opinion that the revised percentages would not be applicable and only the percentages operative in the previous year would be operative in that case.

24. Thus, the said case was decided on the language of Section 23A of the 1922 Act and of the Finance Act , 1959 and does not lay down any general proposition regarding the applicability of law as on 1st April to the assessment year (irrespective of the previous year followed by the assessee).

25. <CITATION> .) Ltd.  71 ITR 380 (Mad.), it was held that the amended Section 23A which had become applicable from 1-4-1954 would apply in the assessee's case whose accounting year ended on 31-5-1954 (relevant for the assessment year 1955-56). Thus, <ORG> view is different than that of <ORG>.

26. The scheme of levy of additional income-tax on undistributed profits of private limited companies under Section 104 of the 1961 Act (and Section 23 A of the 1922 Act) is entirely different from levy of income-tax on income or allowance of expenditure. Under the aforesaid provisions, a private company must distribute out of its total income statutory percentages as dividend within 12 months of expiry of its previous year, otherwise, it will have to pay additional income-tax. Thus, the law applicable would be as obtaining immediately on close of the previous year. The proposition regarding applicability of income-tax laws as on 1st April being applicable in assessment year would, therefore, not be applicable while considering the special provision of levy of income-tax on undistributed income. That is why the case law relevant to the controversy before us, namely, of law existing on 1st April being applicable to assessment year was neither cited nor considered by <ORG> in <ORG>'s case (supra). We may point out that the assessee had to take positive action of declaring dividend within a time framework, i.e., immediately after the close of accounting year and in any case before the expiry of 12 months thereafter so as to avoid levy of additional income-tax. If the assessee did not declare dividend of statutory percentages of total income, then additional income-tax was to be levied by the <ORG>. However, in the case before us, no positive action on the part of the assessee is contemplated and only at the time of computation of the total income, the <ORG> has to disallow part of certain expenditure (on payment of interest) in the light of law obtaining as on 1st April of the assessment year in question.

27. Let us now analyse the assessee's arguments based on <ORG> case (supra). The first argument is that though there is nothing in Section 40A(8) to say that the amount disallowed under that Section shall be deemed to be the income of the assessee but the said Section by implication treated the disallowed expenditure on interest as part of the income. Thus, there was implied deeming of the disallowed interest as income and the implied deeming of income did not have any retrospective effect as the <ORG>'s usual practice was of giving the assessee a chance to arrange its affairs. It was admitted that Section 40A(8) was introduced by the Finance Act , 1975 with effect from the assessment year 1976-77, thus, giving one year's advance notice, still it was claimed that sufficient notice was not given to the assessees to arrange their affairs. Though the revenue contended that the <ORG> was competent even to retrospectively amend the law and, thus, assess income which had already accrued in the earlier years, the assessee urged that for retrospective legislation, there must be specific intention expressed by the <ORG> and that in the present case, there was no express declaration of such intention by the <ORG>. It was urged that holding that Section 40A(8) operated from the assessment year 1976-77, irrespective of the previous year, would lead to absurd and anomalous results and applying the modern 'purposive approach' by considering the policy behind the enactment of curbing credits by non-banking concerns, the curb could only be on taking fresh interest-bearing deposits after 1-4-1976.

28. We have given very careful and anxious consideration to this matter and we find ourselves unable to accept the assessee's contentions. There is no warrant for equating the disallowed expenditure on interest with deemed income. Income and expenditure are two different and diametrically opposite concepts. Income is what comes in, while expenditure is what goes out. Thus, to treat income as interchangeable with expenditure would be confusing the issue. We, therefore, cannot accept the proposition that disallowed expenditure becomes deemed income.

29. Regarding giving the assessee a chance to arrange its affairs, we are unable to find any such rule of construction of statutes. When the <ORG> has full and plenary powers even to make laws retrospective in operation, we do not see anything wrong with the <ORG> introducing Section 40A(8) by the Finance Act , 1975 and making it effective only one year later, i.e., from 1-4-1976 which would thus be operative in the assessment year 1976-77. <ORG> in <NAME> of <NAME>'s case (supra) at p. 223 observed "under the express terms of Section 3 of the Indian Income-tax Act, 1922, the subject of charge is not the income of the year of assessment, but the income of the previous year. This is in direct contrast with the English Income-tax Acts, under which the subject of assessment is the income of the year of assessment, though the amount is measured by yardstick based on previous years". Similarly, <ORG> in <NAME> case (supra) at p. 665 observed : "It was contended by the learned counsel for the assessee that Section 2(6C)(iii) came into force on April 1, 1955, while the previous year relevant to the assessment year in question was from October 1, 1953 to September 30, 1954. Section 2(6C)(iii) , therefore, did not apply to the case. The contention is not well founded Further, it is well recognized that the specific dates which are mentioned in the Income-tax Act have reference to the assessment years and have nothing to do with the accounting years of an assessee which may differ from person to person. The amendment contained in the Finance Act , 1955, in respect of Section 2(6C)(iii) was thus applicable to the assessment year 1955-56 and was rightly invoked by the Income-tax Officer."

30. We are unable to accept <NAME> contention that there was any ambiguity regarding the applicability of provisions of Section 40A(8) or that the applicability of the said provisions to the assessment year 1976-77 would lead to manifestly absurd and anomalous results. When the intention of the <ORG> is clear and unequivocal, there is no room for trying to go behind the clear language of the Section.

31. <NAME> on Interpretation of Statutes, Twelfth edn. observes at p. 28 under Chapter 2 while discussing the general principles of interpretation that the primary rule is of literal construction. The rule of construction is 'to intend the <ORG> to have meant what they have actually expressed'. "Where the language is plain and admits of but one meaning, the task of interpretation can hardly be said to arise."

32. Odgers' Construction of Deeds and Statutes, Fifth end. at p. 260 under the head '8. Statute, if clear, must be enforced' observes "if the language of a statute is clear, it must be enforced though the result may seem harsh or unfair and inconvenient". Reliance is placed on Re. <NAME>'s Contract [1941] Ch. 463 at p. 478 per Lord Greene M.R.

33. Craies on Statute Law, Seventh end. at p. 64 under Chapter 'Construction where the meaning is plain' under the heading 'Meaning and legal effect distinguished' observes : "There is no place for interpretation or construction except where the words of the statute admit of two meanings." As <NAME> said : "Where the words of an Act of <ORG> are clear, there is no room for applying any of the principles of interpretation which are merely presumptions in cases of ambiguity in the statute." Under the heading 'Construction according to intention' (on the same page) the author observed : "The cardinal rule for the construction of Acts of the <ORG> is that they should be construed according to the intention expressed in the Acts themselves. If the words of the statute are themselves precise and unambiguous, then no more can be necessary than to expound those words in their ordinary and natural sense. The words themselves alone do in such a case best declare the intention of the law-giver." It was further observed (on p. 65) that the primary rule is the literal rule and that the intention of the <ORG> is not to be speculated on.

34. Bindra on Interpretation of Statutes, Fifth edn. at pages 552-553 under the heading 'Rule to determine tax liability' noted that the Lord <NAME> observed in <NAME> v. Attorney General [1869] LR 4 HL 100 : "As I understand the principle of all fiscal legislation, it is this : if the person sought to be taxed comes within the letter of the law, he must be taxed, however, great the hardship may appear to the judicial mind to be". Similarly, <NAME> in Attorney General v. Earl of <NAME> said : "Therefore, the <ORG> fails if the case is not brought within the words of the statute, interpreted according to their natural meaning". At p. 554 under the head 'Literal construction of words used', the author observed : "It is no doubt true that in construing fiscal statutes and in determining the liability of a subject to tax, one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law. If the revenue satisfies the <ORG> that the case falls strictly within the provisions of the law, the subject can be taxed." At p. 559, under the head 'Considerations of reason and justice not material', it was noted that in <NAME> v. Hall,;Tounten, J. observed with reference to stamp law that it "imports nothing of reason and justice but depends entirely upon the language of the <ORG>". The author further observed on the basis of <CITATION> AIR 1957 AP 706, 710. "In case of a taxing statute, the <ORG> should be guided by the general scope of the enactment and the express provisions of the statute and not by considerations which might weigh in a case arising under the statute of frauds or similar statutes". At p. 560, the author noted that in the case of a fiscal enactment, one has to look at what is clearly said. There is no room for any 'intendment'. No argument based on hardship or inconvenience can be entertained. Rule of strict construction does not mean that the language of the provisions should be tortured into meaning something artificial, if its natural meaning is not repugnant to reason. Thus, the rules of interpretation of statutes are quite emphatic that where the language of a statute is clear, effect should be given to it, however, hard the case of the taxpayer may appear to be.

35. Applying the said rules to the case before us, we do not see how the provision for disallowance of interest under Section 40A(8) is not applicable to the assessment year 1976-77. We are, therefore, unable to accept <NAME> argument that literal construction of Section 40A(8) would lead to absurd and anomalous results. <NAME> has not spelt out what absurd or anomalous results he visualised and we are unable to see any such results. According to us, the provisions of Section 40A(8) do not lead to any absurd or anomalous results and the intention of the <ORG> is quite clear that the said provisions are to apply in the assessment year 1976-77 and, therefore, the said provisions would apply, irrespective of the fact as to which previous year the particular assessee follows and so long as the previous year followed by the assessee would be relevant for the assessment year 1976-77, the provisions of Section 40A(8) would apply to that particular assessee. We have already noted that the <ORG> had given the assessees one year's notice by introducing the said provision in the Finance Act , 1975 though it. was applicable for the assessment year 1976-77. Therefore, the submission of <NAME> that an assessee should be given adequate notice to arrange his affairs, though legally not correct, is still factually invalid because the <ORG> did give one year's advance notice to the assessees to arrange their affairs. The <ORG> has plenary powers to legislate prospectively as well as retrospectively and there is no limitation on the <ORG>'s power to direct from which date a particular fiscal provision would operate. It is true that in some cases the <ORG> does specify a date from which date the said provision is to come into force, For example, under Section 40A(3) in respect of disallowance of payment of Rs. 2,500 or more not paid by a crossed cheque, the <ORG> did specify that payments made after 31-3-1969 would be hit by the said provision. However, the"<ORG> has also specified in respect of a number of other fiscal provisions, particularly annual amendments to the 1961 Act brought through the Finance Act s that certain provisions would be applicable with effect from specified assessment years. This is a well recognized and much used method of amendment of the Act. We cannot arrogate to ourselves the power to sit in judgment over the wisdom of introducing a particular fiscal provision with effect from a particular assessment year and we have to give effect to the clear legislative intention as expressed by the <ORG> through the amendment to the Act. It is not for us to twist the fiscal provision on the ground that literal construction of the fiscal provision would result in hardship or that the particular assessee did not get sufficient advance notice to arrange his affairs in the light of the amendment. Nor can we import 'purposive approach' to hold that though Section 40A(8) was clearly directed to be operative with effect from 1-4-1976 for the assessment year 1976-77, yet, according to us, it would apply only to expenditure on interest incurred after 1-4-1976. For the foregoing reasons, we are, therefore, anable to accept the assessee's contentions based on the view taken by the Madras Bench.

36. In the result, we uphold the Commissioner (Appeals)'s order that Section 40A(8) was applicable in the assessment year 1976-77 and, therefore, the disallowance made by the <ORG> stands upheld.

37. We now deal with the other grounds raised in this appeal.

38. Ground Nos. 2-3 are regarding assessability of reimbursement of medical expenses and applicability of Sections 40A(5) / 40(c) of the Act. The <ORG> in paragraph 3 of the assessment order observed as under :

3. Disallowance under Section 40A(5) and under Section 40(c) .-Assessee has worked out this disallowance at Rs. 2,60,659 without taking into account reimbursement of medical expenses. The same has been considered as perquisites while arriving at the above disallowance. The correct disallowance works out to Rs. 2,84,151.

The Commissioner (Appeals) in paragraph 7 noted the assessee's grievance against the <ORG>'s treating reimbursement of medical expenses as perquisite. He upheld the <ORG>'s action in applying Section 40A(5) which finding, according to us, was unnecessary as there was no controversy regarding the disallowance of expenses of Rs. 2,60,659 and the only controversy before the Commissioner (Appeals) was regarding the treatment of reimbursement of medical expenses as perquisite by the <ORG>. Hence, ground No. 2 raising the point whether Section 40A(5) or Section 40(c) applied to director employees being academic is rejected. Salaries of all the directors were above Rs. 72,000 and, therefore, it is immaterial whether Section 40(c) or proviso to Section 40A(5) applies in the case of director employees.

39. The Commissioner (Appeals) further held that cash reimbursement of expenses constituted a distinct addition to the salary of the director employees. He thus varied the <ORG>'s findings because the <ORG> had treated the reimbursement of medical expenses as perquisite. The assessee-company as per Annexure XIII (paper book, page 31) had worked out the disallowance under Section 40A(5) in respect of directors at Rs. 2,28,424 (as exceeding Rs. 72,000 in each case) and in respect of other employees at Rs. 32,235 and the total disallowance at Rs. 2,60,659 and had given a note that the medical expenses reimbursed to the employees and directors had not been considered as perquisite while computing the aforesaid disallowance. The company furnished details of medical expenses (PB 32) of directors at Rs. 13,608 and all other employees at Rs. 10,233 totalling Rs. 23,841 and it is this amount which the <ORG> added as 'disallowance under Section 40A(5) and 40(c) '.

40. Thus, the controversy before us is whether the Commissioner (Appeals) was right in treating the reimbursement of medical expenses as part of salary.

41. We may straightaway note that the matter is covered squarely by a decision of <ORG> in <CITATION>  3 SOT 72, where in paragraph 19 the Bench noted that Explanation 2 to Section 40A(5) defined not only 'perquisites' but also defined 'salary' by stating that 'salary' has the meaning assigned to it in Section 17(7) , read with Section 17(5) , of the Act subject to certain modifications, namely, that perquisite was omitted from Section 17 (/)(iv). The Bench noted that 'profits in lieu of or in addition to salary or wages' was not omitted from the same Clause and that Section 17(3)(ii) defining 'profits in lieu of salary' included 'any payment . . . received by an assessee from an employer'.

42. The Special Bench observed that "the words 'any payment' again is wide enough to cover every payment made by the employer to the employee irrespective of the context in which or the purpose for which the payment is made.... In other words, it would also include a payment made by the employer to the employee which is in the nature of payment made for reimbursement of expenses. (p. 77)

43. The Bench then arrived at the conclusion that 'salary as defined in Explanation 2 includes every cash payment due to or received by an employee'. The Bench was considering reimbursement by the employer to the employee of medical expenses and lunch expenses (paragraph 8).

44. At the hearing before us, the learned counsel for the assessee urged for reconsideration of the aforesaid <ORG> decision. He relied on <ORG>'s order in the assessee's case for the assessment year 1977-78 where the Bench had held in paragraphs 10 and 10(a) that cash reimbursement made by the assessec-company to its employees was not hit by Section 40A(5) in case of employees and by Section 40(c) in the case of directors and employee-directors. The Bench in paragraph 8 noted the assessee's contention that medical reimbursement was a perquisite but in view of expression 'whether convertible into money or not' qualifying perquisite in Section 40A(5)(a)(ii) , cash payments could not be covered by. the said sub-clause. Support was taken from <CITATION> .) Ltd.  132 ITR 125 (Bom.) where, following <CITATION> .  119 ITR 431 (Cal.) and <CITATION> .  125 ITR 150 (Mad.), <ORG> held that amount paid by way of bonus and commission in cash by the assessee-company to employees was not a perquisite within the meaning of Section 40(c) (/7i) in view of the said term 'whether convertible into money or not' used in the said Section (which was operative in the assessment year 1964-65). The Bench accepting this contention held that medical reimbursement paid in cash was not a perquisite, as Section 40A(5)(a)(ii) contemplated disallowance of payment in kind only by the employer to the employee. The Bench noted that similar view had been taken in <CITATION> .  137 ITR 285 (Cal.) which had followed its earlier decision in <ORG> case (supra) while interpreting provisions of Section 40(c)(iii) in respect of motor car allowance paid in cash to employees.

45. For holding further that the reimbursement of medical expenses was not even part of salary, the said Bench 'A' relied on the <ORG>, <ORG> decision in IT Appeal Nos. 676-679 (<ORG>.) of 1980 dated 30-3-1981 (PB 33-34).

46. We have perused the said decision of <ORG> where for holding that the cash allowances are not perquisites, reliance was placed on <ORG>'s case (supra) and <CITATION> .  125 ITR 341 (Kar.). However, <ORG> further observed that medical reimbursement was not a 'remuneration' within the meaning of Section 40(c) nor was a 'benefit or amenity'. The Bench for taking this view relied on some earlier decision which has not been made available to us. Thus, <ORG>'s decision is no authority for holding that cash reimbursements by the employer to the employee are not part of salary. We have already noted above detailed discussion by <ORG> in <ORG>'s case (supra) for holding that cash payments by the employer to the employee are covered by salary.

47. The learned counsel for the assessee next urged that the expression 'whether convertible into money or not' occurring in Section 40A(5)(a)(ii) qualifying 'perquisite' excludes cash payment as was held in <ORG>'s case (supra). It is next urged that the definition of 'perquisite' in Explanation 2(b) to said Section is exhaustive and that Clauses (i) to (v) thereof do not contemplate cash payment.

48. Accepting the above argument of the assessee should imply that cash payments being not covered by the definition of 'perquisite' under Explanation 2(b), should fall under 'salary' under Explanation 2(a) in view of inclusive definition of 'salary' as per Section 17(1) which has been adopted by Explanation 2(a) but the learned counsel for the assessee even disputes this proposition on the ground that the ordinary meaning and connotation of 'perquisite' should not be ignored and while ordinary meaning of 'salary' does not include reimbursement of expenses, ordinary meaning of 'perquisite' would take in reimbursement of expenses. For the proposition, he refers to discussion under the head 'Perquisite' in Kanga & Palkhivala's Law and Practice of Income-tax, Seventh edn. under Section 17 which reads as follows :

'Perquisite'.-'Perquisite' is defined in the Oxford English Dictionary as 'any casual emolument, fee, or profit, attached to an office or position in addition to salary or wages'. 'Perquisite' denotes a personal advantage ; it is something that benefits a man by going 'into his own pocket' : it does not cover a mere reimbursement (be it by way of allowance) of travelling or other expenditure incidental to the employment. Thus, transport facilities made available to an employee for going from home to office and back, should not be regarded as a perquisite. (p. 311)

49. The assessee relied on CGT v. <NAME> [1971] 82 ITR 599 where <ORG> approved the following observations of Craies on Statute Law, Sixth edn. at p. 213 :

...An interpretation Clause which extends the meaning of a word does not take away its ordinary meaning. An interpretation Clause is not meant to prevent the word receiving its ordinary, popular and natural sense whenever that would be properly applicable, but to enable the word as used in the Act, when there is nothing in the context or the subject-matter to the contrary, to be applied to some things to which it would not ordinarily be applicable. (p. 605) Reliance was also placed on CGT v. Dr. <NAME> [1974] 95 ITR 476 at p. 481 where <ORG> extracted the observations of <ORG> in <ORG> v. <NAME> AIR 1957 SC 121 to the effect that there must be compelling words in the statute to show a meaning different from or in excess of the ordinary meaning was intended and where within the framework of the ordinary acceptation of a word, every single requirement of the definition Clause was fulfilled, it would be wrong to take the definition as destroying the 'essential meaning' of that word.

50. The revenue's contention was that the purpose of introduction of Section 40A(5) was given in the Finance Minister's Budget Speech for 1971-72 in  80 ITR (St.) 96 which reads :

I am firmly of the view that the fiscal instrument must be deployed to discourage payment of high salaries and remunerations which go ill with the norms of egalitarian society. I accordingly propose to impose a ceiling on the remuneration of company employees which would be deductible in the computation of taxable profits. The ceiling is being set at Rs. 5,000 per month. Together with the existing ceiling of Rs. 1,000 per month in the case of perquisites, the allowable overall ceiling on remuneration and perquisites, for purposes of taxation, will be at Rs. 6,000 per month....

It was, therefore, urged for the revenue that Section 40A(5) was a complete code covering the payments by the company to its employees in the form of salary, remuneration and perquisites and, therefore, no item could be said to fall outside these categories. It was emphasized that while 'perquisite' was given an exhaustive definition by Explanation 2(b) to Section 40A(5) by using the expression 'perquisite means', the term 'salary' was not given an exhaustive definition by Explanation 2(b) and only the inclusive definition of Section 17(1) was grafted in the said Explanation and, therefore, whatever does not fall under the head 'Perquisite' would be covered under the inclusive definition of 'salary'. It was urged that in this context the ordinary meaning of the word 'perquisite' cannot take away the force of an enactment nor defeat its object. Reliance was also placed on Notes on Clauses in the Finance (No. 2) Bill, 1971 in  80 ITR (St.) 147 where dealing with Clause 10 it was observed :

... 'salary' is being defined broadly on the lines of the provision in Section 17 of the Income-tax Act subject to certain modifications. The expression 'salary' will include wages ; any annuity or pension ; any gratuity, any fees, commissions or profits in lieu of or in addition to any salary or wages;... It will, however, not include perquisites....

It was, therefore, urged that reimbursement of medical expenses having been held to be not perquisite in view of the expression 'whether convertible into money or not' governing the expression 'perquisite' in Section 40A(5)(a)(ii) and thus restricting its ordinary meaning, the cash reimbursement would necessarily fall under 'salary' in view of the inclusive and wide definition of 'salary' in Section 17(1) , read with Section 17(3) and in view of the clear enunciation of law by the <ORG>, Special Bench, Bombay in <ORG> case (supra).

51. We see merit in the revenue's contentions. While definitions of 'sa<NAME>ry' and 'perquisite' in Section 17(1) are inclusive, in Exp<NAME>nation 2 to Section 40A(5) an exclusive and exhaustive definition of 'perquisite' was given as per C<NAME>use (b) covering only five categories enumerated therein, but in respect of 'sa<NAME>ry', the inclusive definition of Section 17(7) was adopted, which means that what is not covered by five categories of 'perquisite' would fall in the net of 'sa<NAME>ry' in view of 'sa<NAME>ry's' inclusive definition in Section 17(1) . We have already noted that Section 17(5) defining 'profits in lieu of sa<NAME>ry' includes under Sub-c<NAME>use (ii) any payment due to or received by the employee from the employer. Thus, all payments by the employer to the employee, which are held to be not perquisite like reimbursement of medical expenses, would necessarily be covered under 'sa<NAME>ry'. In this connection, the revenue is right in relying on the Finance Minister's speech as well as notes on c<NAME>uses to show the <ORG>'s intention in introducing Section 40A(5) to put a curb on sa<NAME>ries, remunerations and perquisites paid by companies to its high executives. The 'mischief rule' as enunciated in Heydoris Case 3 Co. Rep. <NAME>, of <ORG>, Twelfth edn. is :

...that for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered: (1st) What was the common law before the making of the Act. (2nd) What was the mischief and defect for which the common law did not provide. (3rd) What remedy the <ORG> hath resolved and appointed to cure the disease of the commonwealth. And, (4th) The true reason of the remedy ; and then the office of all the Judges is always to make such construction as shall suppress the mischief and advance the remedy and to suppress subtle inventions and evasions for continuance of the mischief and pro privato commodo and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico.... (p. 40)

52. Thus, in view of the declared intention of the <ORG> to curb the high salaries and perquisites of senior executives of the companies, we have to interpret Section 40A(5) so as to advance the remedy and to suppress subtle inventions and evasions for continuance of the mischief and to add force and life to the cure and remedy, according to the true intent of the makers of the Act. Thus, to hold that reimbursement of medical expenses would neither be covered under 'salary' nor under 'perquisite' would be to defeat the purpose of the legislation.

53. <NAME> on Interpretation of Statutes under the head 'Construction ut res magis valeat quam pereaf observed :

'If the choice is between two interpretations, the narrower of which would fail to achieve the manifest purpose of the legislation, we should avoid a construction which would reduce the legislation to futility and should rather accept the bolder construction based on the view that <ORG> would legislate only for the purpose of bringing about an effective result.' 'Where alternative constructions are equally open, that alternative is to be chosen which will be consistent with the smooth working of the system which the statute purports to be regulating ; and that alternative is to be rejected which will introduce uncertainty, friction or confusion into the working of the system'. (p. 45) Applying the above principle, we have to avoid an interpretation which would make the provisions of Section 40A(5) ineffective in curbing the mischief which the <ORG> intended.

54. <NAME> in Law of Income-tax, Seventh edn., Vol. 1 under Section 17 under the head "4. 'Perquisites' Sub- section (2).--'Perquisite', meaning of", observed :

Formerly, the word 'perquisite' was used to denote emoluments not fixed generally and granted mostly ex gratia, whether in cash or in kind, it denoted a benefit, amounts or advantage mostly in kind enjoyed by the employee at the cost of the employer, generally in addition to the salary or wages to which he is entitled. Perquisites are, in many cases, in the nature of voluntary payments attached to an office or employment, such as the fee of any clerk serving under a barrister, but in some cases, there may also be legal obligation to pay, though, in common parlance, one rarely used the term 'perquisites' where the payment is claimable as of right. Voluntary or not, when actually paid, they fall to be taxed. Their characteristic is that they are payable only during the continuance of employment and are directly dependent upon service. They cease when the employment ceases. (p. 970)

55. At the same page, the commentator noted that 'the grant or allowance of perquisites...has become a regular feature of almost all employment,... The statutory definition of salary and wages had, therefore, to be enlarged as to comprehend the most common forms of advantages and benefits enjoyed by an employee....'

56. While dealing with 'profits in lieu of salary' under Section 17(5) at page 983 under paragraph 14(c) 'other payments received from employer-clause (ii)', the commentator noted that "any payment due to or received by an asscssee from his employer...is taxable as 'profits in lieu of salary'.

... This is a comprehensive provision by virtue of which all payments made by an employer to an employee whether made in pursuance of a legal obligation or voluntarily are brought under 'profits in lieu of salary'.

57. We further note that <ORG> in <CITATION> [l985] 153 ITR 444 observed at p. 455 that cash payment made by the employer to the employee as cash allowance was not covered under definition of 'perquisite' as per Clause (b)(iv) of Explanation 2 to Section 40A(5) and that the said expenditure was expenditure or payment coming under Section 40A(5)(a) (0 which covers any expenditure which results directly or indirectly in the payment of any salary to employee. The Court, therefore, held that car allowance was, thus, a cash payment periodically made in addition to salary, and, therefore, partook of the nature of salary.

58. In this context, we also note that <ORG> (P.) <CITATION>  149 ITR 457 was dealing with disallowance under Section 40(a)(v) of reimbursement by employer company of medical expenses incurred by managing director in the assessment years 1969-70 and 1970-71 when the said provision was in force. [ Section 40(a)(v) was deleted and substituted by Section 40A(5) with effect from 1-4-1972.] <ORG> dissented from the Full Bench decision of <ORG> in <CITATION> .  135 ITR 19 where it was held that house rent allowance paid by the employer company to its employee was a perquisite and the words 'whether convertible into money or not' qualifying the words 'beneftt, amenity or perquisite' would not exclude cash payments by the employer to the employee and a contrary construction accepted by the Karnataka, Calcutta and Madras High Courts was irrational defeating the very purpose of Section 40(a)(v) -The Kerala High Court, therefore, held that house rent allowance received by an employee from an employer was covered by Section 40(a)(v) .

59. <ORG>, however, fell in line with the aforesaid three <ORG>, who, in <ORG> case (supra), <ORG> case (supra) and <ORG>'s case (supra) had taken the view that the expression 'whether convertible into money or not' qualifying the words 'benefit, amenity or perquisite' excluded cash payments made by the employer to the employee. <ORG> in this context had noted at page 462 the contentions by the assessee's counsel : 'According to him, any cash payment made by the company to its employee would be part of the salary'. <ORG> at page 465 observed : 'Any cash payment could well be part of the salary as given in Section 17 of the Act'. <ORG> accordingly held that reimbursement of medical expenditure of the managing director was not a 'benefit, amenity or perquisite', whether convertible into money or not, and, therefore, Section 40(a)(v) did not apply to cash payments by the employer to the employee. [The question regarding medical reimbursement expenses being part of salary was not referred to <ORG> as under Section 40(a)(v) fell only expenditure on provision of benefit, amenity or perquisite]. We may elucidate by referring to legislative changes. Section 40(c)(iii) , as amended by the Finance Act , 1964, put a ceiling of one-fifth of salary, on all expenditure on employees resulting in benefit, amenity or perquisite. This Clause was substituted by Section 40(a)(v) with effect from 1-4-1969 which put a further ceiling of Rs. 1,000 per month on expenditure on benefit, amenity or perquisite to an employee. Section 40(a)(v) was substituted by Section 40A(5) with effect from 1-4-1972 which put a ceiling on salary to employees of Rs. 5,000 per month, besides ceiling on perquisites of Rs. 1,000 per month and one-fifth of salary. Similarly, on the directors of the company, overall ceiling of Rs. 72,000 was imposed with effect from 1-4-1972 under Section 40(c) in respect of expenditure on remuneration, benefit, amenity, etc. Thus, before 1-4-1972, there was no controversy whether an expenditure was covered by salary or perquisite. In case of an employee of a company, the <ORG> was concerned only with curbing perquisites, benefits or amenities. The <ORG> was not concerned about quantum of salary of employees. In respect of a director of a company, the <ORG> was concerned only with reasonableness of total expenditure on director as remuneration, benefit, amenity or expenditure or allowance in respect of company's assets.

60. In this context, we may also note that the head-note in <ORG>'s case (supra) is incorrect insofar as it is indicated that house rent allowance is not a perquisite 'or part of salary'. All that <ORG> held at page 342 was that payment of house rent allowance or bonus is not a perquisite because of the expression 'whether convertible into money or not' qualifying the words 'benefit, amenity or perquisite'.

61. We are, therefore, of the view that the reimbursement of medical expenses being a cash payment by the employer to the employee would fall under 'salary' in view of the very wide and inclusive definition of 'salary' as per Section 17(1) which is adopted by Clause (a) of Explanation 2 to Section 40A(5) , in contradistinction to only five enumerated categories being covered under 'perquisites' as per Clause (b) of said Explanation 2 to Section 40A(5) . Thus, salary would cover any perquisite not falling in the said five categories of perquisites and particularly a cash payment [being hit by the expression 'whether convertible into money or not' qualifying 'perquisite' in Section 40A(5)(a)(ii) ]. We have already noted above the view taken by <ORG> in <ORG>'s case (supra) that Section 17(3) by giving inclusive definition of 'profits in lieu of salary' [appearing in Section 17(7)(iv) ] covered in its Sub-clause (ii) any payment due to or received by an employee from an employer. We note that the said Sub-clause excluded from purview of salary, following payments :

(A) death-cum-retirement gratuity-Section 10(70) of the Act (B) payment in commutation of pension-Section 10(10A) (C) compensation on retrenchment received by workmen under the Industrial Disputes Act , 1947-Section 10(10B) (D) payment from a provident fund to which Provident Funds Act , 1925 applies- Section 10(1) (E) accumulated balance in provident fund becoming payable to employee- Section 10 (/2) (F) house rent allowance- Section 10(13A) .

However, under the said sub-clause, payments from provident fund or other fund (not being approved superannuation fund) are included under salary to the extent it does not consist of contributions by employee or interest on such contributions.

62. From the above narration, it would be clear that but for the exclusion provided in the said sub-clause, the said payments would have been treated as salary though taking ordinary meaning of payments 'in lieu of salary', nobody would consider such payments to be in lieu of or instead of or in substitution of salary. This shows that the said Section 17(3)(ii) was very wide in its sweep, despite its rather deceptive or inelegant descriptions as 'profits in lieu of salary'.

63. We further observe that Clause (iv) of Section 17(i) besides taking in its sweep 'profits in lieu of salary', also covers 'profits in addition to any salary'. Thus, any payments received by an employee from his employer under terms of service contract or otherwise would be fully caught in the net of 'profits in addition to any salary'. [Emphasis supplied]

64. We further note that Clause (i) of Section 40A(5)(a) covers 'any expenditure which results directly or indirectly in the payments of any salary'. [Emphasis supplied] Salary is recompense for the services rendered. While salary (paid periodically) is the direct payment : any benefit or advantage or amenity received by the employee from employer would be the indirect payment of salary and would thus be clearly covered by the said Clause (0 of Section 40A(5)(a) .

65. For the above reasons, we see no ground to depart from the view taken by <ORG>, Bombay, in <ORG> case (supra). We would accordingly hold that reimbursement of medical expenses being a cash payment was rightly treated as part of salary for computing the disallowance under Section 40A(5) . Position is different while assessing perquisite of medical reimbursement in hands of employee under Section 17 in view of the <ORG> circulars. Circular No. 336 dated 16-4-1982 [See Taxmann's Direct Taxes Circulars, Vol. 1, 1985 edn., p. 163] directed that only medical reimbursement in excess of one month's salary is to be included in hands of employee. Circular No. 376 dated 6-1-1984 [See Taxmann's Direct Taxes Circulars, Vol. 1, 1985 edn., p. 163] clarified that only reimbursement in excess of Rs. 5,000 was includible. However, Circular No. 445 dated 31-12-1985- 24 Taxman (St.) 111 exempted all expenditure in a recognised public hospital in India.

66. We may further observe that the position under Section 40(c) is clearly against the assessee as the above argument is not available to the assessee because the word 'perquisite' does not appear in Section 40(c)(i) which only uses the words 'remuneration or benefit or amenity'. Further, the restrictive phrase 'whether convertible into cash or not' is missing in the said clause. Under these circumstances, the reimbursement of medical expenses to a director by employer company would clearly be hit by Section 40(c)(i) because it is an expenditure which results directly or indirectly in the provision of 'remuneration or benefit or amenity' to a director.

67. Thus, both under Section 40A(5) as well as under Section 40(c) , reimbursement of medical expenses by the employer company to the employee would form part of the remuneration of the employee and in case of a director, any payment in excess of Rs. 72,000 would have to be disallowed. In case of employees simpliciter, provisions of Section 40A(5) would apply and, therefore, considering the medical reimbursement as part of the salary, perquisites in excess of one-fifth of salary have to be disallowed. As from the computation given to us, it is not clear how the disallowance has been computed by the ITO, we direct the ITO to examine if any recomputation of disallowance is called for in the light of our directions above.

Ground No. 1 :

68. The assessee is aggrieved against disallowance of depreciation on assets used by the assesssee for conducting scientific research. These assets were installed in the earlier years for which deduction equivalent to full cost has already been allowed to the assessee under Section 35 of the Act. The <ORG> rejected the assessee's claim for depreciation and the Commissioner (Appeals) upheld it in view of the amendment of Section 35(2)(iv) by the Finance (No. 2) Act, 1980. Under similar circumstances, <ORG> in <CITATION> .  149 ITR 771 has held that depreciation cannot be granted for the subsequent year on the assets on which the relief under Section 35(2) equivalent to the full cost has already been allowed. The assessee, however, contends that the constitutionality of the aforesaid amendment in 1980 is under challenge before <ORG> and, therefore, the <ORG> be directed to abide by the decision of <ORG>. We direct accordingly.

Ground No. 4 :

69. Foreign travel expenses of Rs. 19,783 of Mrs. <NAME>, wife of chairman of board of directors of the assessee-company, was disallowed by the <ORG> after observing that the assessee was unable to produce any resolution of board of directors to sanction the said visit by the wife who accompanied her husband on the foreign visit and, thus, according to the <ORG>, there was no evidence that her visit served the business interest of the assessee-company. The Commissioner (Appeals) vide paragraph 9 noted the assessee's contention that Mr. <NAME> had gone abroad for business discussion with the assessec-company's British Associates and had also visited France and Italy where the assessee-company had also its associates and that on such, visits it was customary for meeting at social level that the chairman should be accompanied by his wife. The Commissioner (Appeals), however, rejected the assessee's contention on the ground that the business connection of the wife's visit was too far-fetched.

70. At the hearing before us, our attention was drawn to the company's application to <ORG> for release of foreign exchange for the chairman and his wife and the application form indicated that they were proceeding abroad for business purposes. <ORG> sanctioned on 7-5-1975 foreign exchange of £ 840 for Mr. <NAME> and £ 210 for his wife for their stay of 40/42 days in UK, Italy and France. The learned counsel for the assessee reiterated that the wife accompanying the husband (chairman) was in business interest. Reference was made to company's application dated 18-4-1975 to the Assistant Controller, <ORG>, <ORG>, indicating, that chairman and chief executive of '<ORG> <ORG> extended invitation to Mr. & Mrs. <NAME> and that the wife was accompanying her husband as a number of social engagements were included in the programme. <ORG> was placed on Taxes & Planning dated 15-7-1984 a decision of the <ORG> Bombay Bench in <ORG> v. <ORG> [IT Appeal Nos. 2606 and 2607 (Bom.) of 1982] where in paragraph 22 the Bench upheld the Commissioner (Appeals)'s order that wife accompanying the husband abroad (who is a director of the company) was in business interest.

71. The revenue relied on <CITATION> .  153 ITR 422 (Mad.) and <ORG> (P.) <CITATION>  153 ITR 437 (Guj.). In the first case, wife had accompanied the husband on foreign tour. The husband was a partner of the firm and the wife had accompanied him because of the husband's indifferent health. <ORG> held that the wife's travelling expenses were in the nature of personal expenses and even assuming that the expenditure related to business purposes, the expenditure had a dual and twin purpose and served not only purposes of business but also a personal or private purpose and as the expenditure did not exclusively serve the business, it was not allowable under Section 37(1) of the Act. In the second case, <ORG> was considering the case of a director of a company keeping indifferent health and his wife accompanying him on the foreign tour. It was urged before <ORG> that in case the wife had not accompanied the husband, the company would have had to engage a nurse. <ORG> still held that expenses being personal, were not allowable as the wife was not a qualified or trained nurse.

72. In both the above cases, the asscssees were unable to prove that the wife accompanied the husband for business considerations. The case before us is, therefore, entirely different where it is claimed that the wife accompanied the husband because of business considerations. In the modern age and more so in the Western countries, the senior executives are, as a matter of social custom, accompanied by their wives when the visit, though for business purposes, has necessarily some social aspects also. Under these circumstances, we hold that the expenditure of Rs. 19,783 which includes air-fare of Rs. 15,656 and foreign exchange of Rs. 4,022 equivalent to £ 210 is an allowable expenditure.

Ground No. 5.:

73. The <ORG> rejected the assessec's claim of deduction of surtax and the Commissioner (Appeals), following the Tribunal Special Bench, Bombay decision in <ORG> v. <ORG> [1983] 3 SOT 384, upheld the disallowance. <CITATION>  144 ITR 317 (Cal.), <CITATION>  159 ITR 431 (Ker.) and <CITATION>  26 Taxman 187 (Mad.), similar view has been taken. We, accordingly, uphold the orders of lower authorities on this point.

74. In the result, the appeal is partly allowed.