JUDGMENT
Ajit, K. Sengupta, J.
1. In this reference at the instance of the assessee, the following question has been referred by the Tribunal for the opinion of this court under Section 256(1) of the Income-tax Act, 1961 :
“Whether the Tribunal was right in holding that a sum of Rs. 5,49,917 representing expenses incurred by some of the assessee-company’s employees for use of their own motor car for the purpose of the assessee-company’s business and reimbursed to them as such, was hit by Section 37(3A)/(3B) of the Income-tax Act, 1961 ?”
2. This reference relates to the income-tax assessment of the assessee-company for the previous year ending October 31, 1983, corresponding to the assessment year 1984-85. The assessee-company derives income from manufacture and sale of printing inks and synthetic resins. The assessee-company reimburses the expenses incurred by its employees for using their own motor cars for the purpose of the business carried on by the assessee-company. The aggregate reimbursement made during the relevant previous year on account of expenses incurred by the assessee-company’s employees for use of their own motor cars was Rs. 5,49,917. The Income-tax Officer felt that this reimbursement was hit by the provisions of Section 37(3A)/(3B) of the Income-tax Act, 1961. This view was upheld both by the Commissioner of Income-tax (Appeals) as well as by the Tribunal.
3. Under Sub-section (3A) of Section 37, where the aggregate expenditure incurred by an assessee on any one or more of the items specified in Sub-section (3B) exceeds Rs. 1,00,000, 20 per cent, of such excess shall not be allowed as deduction in computing the business income. One of the items specified in Sub-section (3B) of Section 37 is “running and maintenance of aircraft and motor cars”.
Explanation (c)(ii) also provides that conveyance allowance paid to employees and, where the assessee is a company, conveyance allowance paid to its directors, would also be treated as expenditure on running and maintenance of aircraft and motor cars. In the case of the assessee-company, the motor cars are maintained by the employees. But when the motor cars are used by the employees for business purposes of the assessee-company, the employees concerned are paid by way of reimbursement the expenses for running and maintenance of such motor cars.
4. Before us, it was contended for the Revenue that, where the employees receive reimbursement of expenses incurred by them for using their own motor cars for the purpose of business carried on by the employer (assessee), the expenses are not part of the emoluments of the employees. Therefore, the logical consequence is that the very expenses in the hands of the assessee as the employer will be expenses on running and maintenance of motor cars, it being immaterial to whom the motor cars belong. Even though the employees own and maintain and run the motor cars and the employer only reimburses the expenditure on such maintenance, the employer, i.e., the assessee, by virtue of reimbursement, accepts the expenditure not as the expenditure of the employees but expenditure of its own. For the proposition that reimbursement of the actual expenses incurred by an employee for travelling wholly necessarily and exclusively for the purpose of business of the employer is not part of the salary, reliance was placed on the decision in Pook v. Owen [1969] 45 TC 571 (HL).
5. It is, however, submitted for the assessee that the provisions of Section 37(3A)/(3B) are not very clear as to whether, by the expression “expenditure on running and maintenance of aircraft and motor cars” the Legislature intended to include therein the reimbursement of motor car expenses incurred by the employees in the performance of their duties for the purpose of the business carried on by the assessee, the employer. There is substantial vagueness over the issue, it is contended. It was further argued that, where the provisions of the Act are not clear or are ambiguous, the interpretation should not be made in a manner so as to impose a new burden which does not by express intention emerge from the plain terms. For this purpose, our attention was drawn to a decision of the House of Lords in F. L. Smidth and Co. v. F. Greenwood [1922] 8 TC 193, where Lord Buckmaster has laid down as a principle of interpretation of taxing statutes that no provision should be construed to create a burden by way of taxation which was otherwise not there. Unless the terms of the provisions expressly inflict such burden the court cannot assent to the view that, if a section in a taxing statute is of doubtful and ambiguous meaning, it is possible, out of that ambiguity, to extract a new and added obligation not formerly cast upon the taxpayer.
6. We consider this principle of construction quite valid. But the question is whether, in Section 37(3A)/(3B), there is any lack of clarity. The principle enunciated applies only where the terms of the law are ambiguous or vague. But, in our view, in the context of the provisions of Section 37(3A)/(3B) the said rule of construction has little relevance. Here, we have a non obstante provision which limits the original ambit of Section 37(1) to the extent stated in those new sub-sections. The sub-sections are quite clear that they intend to have a limiting effect on the allowability of residuary business expenditure. The subject of limitation is, inter alia, the expenditure on the running and maintenance of motor cars. The Explanation below the sub-section leaves no doubt that even the conveyance allowance given by way of compensation to the employees for expenditure incurred by them in performing the duties of employment is attracted by the additional sub-sections. At the bottom, this conveyance allowance is also of the character of reimbursement. That being the case, we do not find any ambiguity in the provisions and we cannot say that the plain terms of the provision do not override the general provisions of Section 37(1) in relation, inter alia, to the expenses on running and maintaining motor cars.
7. It is true that the non obstante clause should be governed by the enacting Section 37(1). Section 37(1), as we have said, generally provides for allowance of the residuary business expenditure. Therefore, free from the restrictions of the subsequent non obstante clause, all business expenditure is allowable under Section 37, the sole condition precedent being the existence of nexus with the purpose of the business carried on. So the leaning of Section 37 is towards allowance of business expenditure. The non obstante clause only cuts back this broad scope by specifying certain business expenditure as disallowable. Therefore, it is true that the non obstante clause must be precise and, if imprecise, no restriction can be sought after. It is, however, true that the stipulation in such clauses should be construed very strictly to maintain the broad character of Section 37. Even after applying all these tests we cannot but say that there is no ambiguity or vagueness in the provisions of Section 37(3A)/(3B). The Explanation below the provisions removes the last vestige of doubt. There is abundance of clarity that expenses of reimbursement of motor car expenses incurred by the employees while performing their duties in the business carried on by the assessee take on the character of the assessee’s expenditure on running and maintaining motor cars in the light of the clarification available from Explanation (c)(ii).
8. In our view, the amounts reimbursed are clearly covered by the expression “expenditure on running and maintenance of motor cars” as appearing in Sub-section (3B) of Section 37 of the Income-tax Act, 1961.
9. We are, therefore, of the view that the Tribunal was right in holding that reimbursement of Rs. 5,49,917 made to the employees towards expenditure incurred by them for running and maintenance of their own motor cars in so far as these were used in the course of and for the purposes of the assessee-company’s business operations was clearly hit by Section 37(3A)/(3B) of the said Act.
10. In this view of the matter, we answer the question in this reference in the affirmative and in favour of the Revenue and against the assessee.
11. There will be no order as to costs.
Shyamal Kumar Sen, J.
12. I agree.