1. A. S. CHOWDHURY, J.--The Income-tax Appellate Tribunal, Dacca Bench, Dacca has, in pursuance of a direction issued by this Court, referred the following question for our opinion: "Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the entertainment allowance exempted to the assessee by section 4 (3) (vi) of the Income-tax Act could be restricted to the percentage prescribed in rule 39 of the I. T. Rules."
2. The reference arises in the following circumstances: The petitioner M. Mahmood Ispahani is a Director of a firm called Messrs M. M. Ispahani Ltd., Chittagong, and received during the assessment year, 1962-63 an allowance of Rs, 12,000 for the purpose of entertainment. This amount according to the assessee is liable to be exempted wholly from being included in his total income by reason of section 4 (3) (vi) of the Income-tax Act. The Income-tax Officer rejected the claim and included the same amount of Rs, 12,000 in the total income of the assessee. An appeal having been preferred against the said order, the Appellate Assistant Commissioner, on a consideration of the facts and circumstances of the case, reached the conclusion that the assessee was entitled to an exemption for the allowance for entertainment; but he is not entitled to exemption for the entire amount of Rs, 12,000 but for Rs, 3,000 only. The Appellate Assistant Commissioner observed that item 8(b) of Rule 39 of the Income-tax Rules specifically restricts the amount to Rs, 3,000 and, the assessee is, therefore, not entitled to an amount larger than the said amount.
3. On appeal, the Income-tax Appellate Tribunal upheld the contention of the Revenue and dismissed the appeal of the assessee on the ground that the view taken by the Appellate Assistant Commissioner in regard to the interpretation of rule 39 was correct.
4. The assessee submitted an application under subsection (1) of section 66 of the Act for referring the question quoted at the outset for our opinion. The Tribunal rejected the prayer. As against that order an application was moved in this Court and a Rule was issued and, after hearing the parties, this Court made the Rule absolute and issued the direction for stating the case as mentioned earlier.
5. Before we proceed with the case, we must record our disapproval of the manner in which the Tribunal has stated the case. It has merely said: "The assessee then took the matter on second appeal to the Tribunal, but without any success. The assessee then filed an application under section 66 (1) before the Tribunal, which rejected it. The assessee appellant then moved the High Court under section 66 (1) of the Income-tax Act.
6. As directed by the High Court, we are now referring the following question to it for its opinion."
7. This makes it clear that the Tribunal remains satisfied by only mentioning that an appeal was preferred by the assessee and it dismissed the same. No statement whatsoever has been made as to why the appeal was dismissed. It is true the order made in the appeal is included in the paper book and we may always go through the same but it is a duty of the Tribunal to briefly summarise the order made at the appellate stage when the statement is made. This has been the uniform practice and it is not understood as to why it was not followed in this case. The Tribunal is directed to continue to follow the procedure indicated above in all future references.
8. It is a matter of some regret that the Tribunal did not follow the established practice in this behalf.
9. The statement of a case under section 66 of the Act, it has been uniformly held, should be complete, salient feature discussed and reasons given in order to entitle this Court to reach its conclusion on the statement as drawn by the Tribunal. It should not be assumed that the materials would any how be available, inasmuch as, these documents are printed in the paper book. The Tribunal itself has to make its statement complete without thinking that the statement would be supplemented by the documents printed in the paper book.
10. It was held by the High Court of Bombay in the case of P. M. Hutteesingh & Sons Ltd. v.
11. Commissioner of Income-tax that a statement of the case should be full, clear and precise.
12. Chagla, J. observed : "Under the Act it is the final fact finding authority and I think it is the duty of the Tribunal when they submit a statement of case to the High Court to state the facts clearly, carefully and precisely. After all the High Court only exercise an advisory jurisdiction. Its jurisdiction is to advise the Tribunal on question of law submitted to it and that advisory jurisdiction cannot be exercised usefully unless the fact-finding authority submits the facts carefully, clearly and accurately."
13. The Supreme Court of India also made similar observation in the case of Sohan Parthak & Sons v.
14. Commissioner of Income-tax . In that case it was held that the Tribunal should state clearly its conclusion and findings of fact and should not leave it to the Court to deduce the findings or to collect the facts from different documents which are part of the record.
15. It was also held by the High Court of Bombay in the case of Hanmantram Ramnath v.
16. Commissioner of Income-tax, Bombay , that it was not sufficient for the Tribunal merely to set out the allegation made by the parties, namely, the assessee and the Department without stating whether the Tribunal accepted or rejected those allegations.
17. We have made reference to these decisions in view of our experience about the references that are being made nowadays. We have done so only with the intention that in future in stating the case, the Tribunal should keep in view these well-recognised principles relating to the statement of cases either under subsection (I) or under subsection (2) of section 66 of the Act.
18. Mr. Afzalul Haque, learned Advocate for the Revenue submits that section 4 (3) (vi) read with section 7 of the Act and rule 39 of the Income-tax Rules would clearly show that the amount for1 2 3 which exemption can be claimed is restricted to Rs, 3,000 and the Tribunal has rightly dismissed the appeal of the assessee.
19. Mr. Hasan, learned Advocate for the assessee, on the other hand, submits that section 4 (3) (vi) speaks of total exemption without any limitation regarding amount if it is given as a special allowance to a person to meet expenses wholly and necessarily incurred for the performances of the duties of the office or employment of profit.
20. In this case the assessee, Mr. M. Mahmood Ispahani is admittedly a Director of Messrs M. M.
21. Ispahani Ltd., Chittagong. He, therefore, holds an Office. It is further stated that he has been given an allowance of Rs, 12,000 as enter-tainment allowance in order to allow him to meet expenses incurred for entertainment of guests in the performance of the duties of office of Director. Mr. Afzalul Haque says that it may be so but he cannot be granted exemption for the entire amount of Rs, 12,000 and the exemption allowance is limited to Rs, 3,000. On a consideration of the relevant provision, we find that under subsection (1) of section 4 of the Act, the total income of an assessee of any previous year would, broadly speaking, include all income, profits and gains from whatever sources derived by him fulfilling the requirements of any of the clauses (a), (b) and (c) of subsection (1) of section 4. After having laid down this provision, the Legislature proceeds to grant certain exemption under subsection (3) of section 4 wherein it is provided that any income, profits or gains enumerated in the various clauses to the said subsection shall not be included in the total income of an assessee. One such clause with which we are concerned is clause (vi) which reads as follows:-- "(vi) Any special allowance, benefit or perquisite specifically granted to meet expenses, wholly and necessarily incurred in the performance of the duties of an office or employment of profit."
22. We have already found that the assessee holds an office and he has been given an amount of Rs, 12,000 which is claimed to have been granted to him to meet expenses wholly and necessarily in the performance of the duties of his office. Although this requirement is fulfilled, we are further to examine if the amount is limited to Rs, 3,000 as claimed by Mr. Afzalul Haque. That requires us to consider the rule making authority of the Central Board of Revenue as provided under section 59
(2) (dd) of the Act. It is stated therein that the Central Board of Revenue is entitled to make rules for the ascertainment of the allowance, benefit, perquisites, income, profits or gains for the purpose of clause (vi) of subsection (3) of section 4, subsection (1) of section 7 and subsection (1) of section 12.
23. In pursuance of this provision of the Act, Rule 39 was framed. It reads as follows: "For the purpose of assessm ent under section 7 of the Act, the allowances, annuities, benefits and perquisites specified in column 2 of the Schedule annexed hereto shall, to the extent indicated in column 3 hereof be deemed to be the income of an assessee and shall be included in his total income."
24. Therefore this rule provides that when the income of an assessee is determined under section 7, the allowances granted to him are also to be included in the total income as indicated in column 3 of the Schedule. It is not necessary for us to set out the entire schedule, we are only concerned with item 5 of the schedule which follows the rule. Item 8 is as follows:-- (a)Where the allowance does not exceed Rs.
25. 3,000Nil (b)In other cases The amount, if any, by which much allowance exceeds Rs. 3,000 or 10 percent of the basic salary of the assesse...."
26. It is, therefore, seen that the Tribunal has rightly imposed the limitation in this case as provided by rule 39, Schedule 8 (b) read with section 4 (3) (vi) of the Act.
27. The income of this assessee is determined under section 7 of the Act and after it is so determined, the tax is to be assessed taking into consideration the various provisions of the Act relating to exemptions. Therefore, in making the assessment the taxing authority is not only to consider section 7 but also other provisions of the Act. The Rule-making authority has clearly met the situation by using the expression "For the purpose of assessment under section 7 of the Act . .." This expression indicates that while the income is taken into account, the allowance are also to be taken into consideration keeping in view the rule. One such special allowance is spoken of in section 4 (3) (vi). We are therefore of opinion that these rules are also applicable to section 4 (3)
(vi) although the rule-making authority has not specifically mentioned section 4 (3) (vi).
28. For the reasons stated above we are of opinion that the question is to be answered in the affirmative and we order accordingly. Let the parties bear their own costs.
29. NURUL ISLAM, J.--I agree. (1946) 14 I T R 653 (1953) 24 I T R 395 (1945) 13 I T R 203