1. G.C. GARG, J.--- The Income-tax Appellate Tribunal (Delhi Bench, "E" Delhi) at the request of the Revenue, in proceedings under section 256(1) of the income Tax Act, 1961, referred the following questions of law, said to be arising out of its order, relating to the assessment year 1973-74 to this Court for its opinion:-- "(i) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was entitled to depreciation on technical know-how capitalised at Rs.10 Lakhs?
(ii) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that for the purposes of computing the disallowance under section 40A(5) of the Income-tax Act, the provisions of rule 3(c)(ii) of the Income-tax Rules should be invoked?
(iii) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the excess of expenditure incurred by an assessee in connection with the travelling of an employee should be worked out under rule 6D(2), for the whole of period spent outside the headquarters during the year and not by reference to each trip made by the employee?"
2. After hearing learned counsel for the parties, we find that Questions Nos.(i) and (ii) are covered by a decision of this Court in the ease of the assessee itself, reported as Porritts & Spencer (Asia) Ltd. v.
3. CIT (1989) 180 ITR 211. In that view of the matter, we answer these two questions in the affirmative, i.e. In favour of the assessee and against the Revenue.
4. Some facts relating to Question No.(iii) deserve to be noticed at this stage.
5. The assessee is a company engaged in the manufacture and sale of felts for the paper manufacturing industry. The case of the assessee is that it is entitled to deduction of expenditure incurred on travelling under rule 6D(2) of the Income-tax Rules, 1962 (for short "the Rules"), in respect of each employee by clubbing the days of his travel outside the headquarters of the company during the entire relevant accounting year. The Assessing Officer, however, disallowed a part of travelling expenses in excess of the limits prescribed under rule 6D(2) of the Rules by working out the travelling expenses on a single trip basis. In appeal, the contention of the assessee was that there is nothing in rule 6D which would require that disallowance has to be made by considering a single trip by a particular employee. According to the assessee, all trips of the employees during the relevant accounting year put together are to be considered for the purposes of rule 6D(2) of the Rules. The Commissioner of Income-tax (Appeals) concurred with the Assessing Officer and rejected the contention of the assessee.
6. The case of the assessee before the Income-tax Appellate Tribunal was that under rule 6D(2) of the Rules, the total number of days travelled by each employee during the year should be taken together and considered and not with reference to each trip made by an employee. The Tribunal relying on a decision of the Income-tax Appellate Tribunal, Bombay, in the case of Blackie & Sons (India) Ltd. v. ITO, came to the conclusion that the plea of the Revenue is not correct. It, accordingly, following that decision, allowed consequential relief due to the assessee under this head.
7. Learned counsel appearing for the assessee submitted that the Income-tax Appellate Tribunal was right in law in clubbing all the trips of the employee during the relevant accounting year for the purpose of allowing deductions under rule 6D(2) of the Rules. Mr. Sawhney, learned counsel appearing for the Revenue, however, submitted that the language of rule 6D(2) of the Rules is absolutely clear and there is no scope for coming to the conclusion that all the to of an employee during the relevant accounting year are required to be clubbed together for the purpose of allowance of expenditure incurred by the assessee in connection with the travelling outside the headquarters of such employee for business or profession of the assessee.
8. In order to consider the rival contentions of learned counsel for the parties, it is considered necessary to notice the provisions of rule 6D(2) of the Income-tax Rules, 1962, which read,thus:- "6D. Expenditure in connection with travelling, etc.---
(2) The allowance in.Respect of expenditure incurred by an assessee in connection with travelling by an employee or any other person within India outside the headquarters of such employee or other person for the purposes of the business or profession of the assessee shall not exceed the aggregate of the amounts computed as hereunder-- (a)in respect of travel by rail, road,.Waterway or air, the expenditure actually incurred; (b)in respect of any other expenditure (including hotel expenses or allowances paid) in connection with such travel, an amount calculated at the following rates for the period spent outside such headquarters--- (i)in respect of an employee whose salary is Rs.1,000 per month or moreRs.80 per day or part thereof; (ii)in respect of any other employee Rs.40 per day or part thereof; (ii)in respect of any other person an amount calculated at the rates applicable in the case of the highest paid employee of the assessee: Provided that if the stay of such employee or other person outside his headquarters is at Bombay, Calcutta or Delhi, the amount computed at the aforesaid rates shall be increased by a sum equal to fifty per cent. Of such amount: Provided further that in a case where such employee or other person on any day of his stay outside his headquarters, stays free of charge in a guest house maintained by the assessee, the amount under this clause shall be calculated at one-third of the aforesaid rates and where the employee or such other person is provided lodging only free of charge, at one-half of the aforesaid rates."
9. The assessee took a stand before the Assessing Officer that the expenditure incurred by it in connection with the travelling of its employees outside the headquarters deserves to be considered in group and not by reference to trips by an employee. However, before the Tribunal the stand of the assessee was that all trips by an employee during the relevant accounting year are required to be clubbed together and allowance in respect of expenditure granted and the allowance of expenditure is not to be calculated on the basis of each single trip of an employee as was sought to be contended by the Revenue. The stand of the assessee found favour with the.
10. Income-tax Appellate Tribunal. Rule 6D(2) provides for allowance in respect of the expenditure incurred by the assessee in connection with travelling by an employee outside the headquarters for the purposes of business or profession of the assessee. Clause (b) of sub-rule (2) of rule 6D further provides that in respect of any other expenditure in connection with such travel, an amount calculated at the rates indicated against each item shall be payable. The proviso appearing after sub-clause (b) (ibid) provides that if the stay of such employee or other person is at Bombay, Calcutta or Delhi, the amount computed at the prescribed rate's shall be increased by a sum equal to fifty per cent. Of the such amount.
11. Further proviso below the proviso to clause (b) (ibid), provides that in a case where such employee stays outside his headquarters in a rent-free accommodation or in a guest house maintained by the assessee, the amount payable to him shall be calculated at one-third of the prescribed rates.
12. A combined reading of the aforesaid rule and the provisos appearing thereunder clearly goes to show that this rule refers to an employee, and such employee at more than one place. Thus, it cannot be said that the assessee is entitled to allowance of an expenditure incurred under this head by clubbing the expenses of all the employees relating to a particular accounting year. The benefit also cannot be given to an employee by clubbing the trips undertaken by him during the entire accounting year for the purposes of granting the relief under this rule to the assessee.
13. Clause (b) and the proviso appearing thereunder clearly lead to the conclusion that an employee outside the headquarters is entitled to different rates depending upon the situation, i.e. Stay in a hotel, stay at Bombay, Calcutta or Delhi or stay in a rent-free accommodation, or in a guest house maintained by the assessee. Once that is so, an employee is required to be paid that amount on account of his travelling outside the headquarters of the company keeping in view his each trip, the place and the nature of his stay. The contention of learned counsel for the assessee before the Tribunal was right to the extent that the expenditure of each individual employee is required to be considered under the sub-rule. However, the claim of the assessee that all the trips undertaken by an employee can be clubbed together, cannot be accepted in view of specific provisions contained in clause (b) of sub-rule (2) of rule 6D and the proviso appearing thereunder.
14. We are, therefore, of the opinion that there is nothing in sub-rule (2) of rule 6D of the Rules which may give even the slightest indication to support the contention of the assessee. Rather the use of the words "an employee" and "such employee" clearly leads to the conclusion that the expenditure for the purpose of rule 6D(2) of the Rules is to be considered on the basis of each trip of an individual employee outside the headquarters.
15. For the conclusion arrived at by us above, Question No.(iii) is answered in the negative, i.e. In favour of the Revenue and against the assessee.
16. Reference stands answered accordingly. No costs. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.