1. This is an appeal filed by the assessee for the assessment year 1988-89 and it arose out of the order of the Dy. Commissioner of Income-tax (Appeals), A-Range, Hyderabad dated 30-3-1990.
2. The question at issue is whether the assessee is entitled to claim depreciation on the car purchased by him after taking loan from the bank in which he is an employee under the circumstances stated below.
For the accounting year in question, the assessee worked as Scale 5 Officer in State Bank of India. His designation is "Development Manager - Agriculture", which is equivalent to the rank of Assistant General Manager. He was in charge of the total Agricultural Department in the State of A.P. which was stated to have been divided into four zones: Hyderabad, Vijayawada, Visakhapatnam and Tirupati. In his affidavit dated 13-4-1993, the assessee had solemnly affirmed that his job involved extensive tour of the above four zones apart from visiting the Secretariat, the Department of Agriculture, NABARD and Reserve Bank of India to coordinate the activities of the bank in implementing the various policy decisions of the Government His duties include identifying factors hindering agricultural development in the area of operation of the concerned Agricultural Development Banks, identifying factors to overcome drought situation and boost agricultural activity.
In the nature of the duties performed by him he had to tour the State exclusively. However, the bank did not provide him any conveyance. He himself borrowed from the bank and purchased a car which he had been using during the course of discharge of his official duties. He was entitled to reimbursement of 50 litres of petrol bills. He had submitted all petrol bills to the Bank for reimbursement. However, he was reimbursed only to the extent of 50 litres petrol every month. He is not in possession of any petrol bill now nor would it be possible for the bank to produce such petrol bills since there was time gap of more than 5 years by now.
3. For the accounting year relevant to assessment year 1988-89, the assessee submitted income-tax return disclosing only the income noted below: Less: Deduction under Chapter VIA 42,200.00 Net Taxable income 14,350.00 It is the case of the assessee that he received a sum of Rs. 8,400 from his employer bank towards hire charges for using his car for his official duties. He received a total of Rs. 8,400 per year. He wanted to depict the said receipt as income from other sources. From out of such income he seeks deduction of depreciation of Rs. 21,166.20 which represents depreciation of 20 per cent on Rs. 1,05,831, the actual cost of the car purchased by him and he paid a sum of Rs. 647.10 towards interest on the car loan taken by him. He seeks to claim both depreciation as well as interest paid on the car loan as deductible expenditure under Section 57(3) of the Income-tax Act and according to the assessee it is his case that in the accounting year relevant to assesseement year 1988-89 the ultimate income received by him under the other sources is a minus figure of Rs. 8,618.10. According to the assessee the working is as follows: litre (10 x 70 x 12) 8,400 13,195.11 LESS: EXPENSES DEDUCTIBLE UNDER SECTION 57: 4. It is note-wrothy that the sum of Rs. 8,400 received towards reimbursement of petrol bills was not disclosed in the income-tax return as an item of income. There was no hire agreement entered into between the assessee and the bank whereunder his car was taken on hire by the bank. So also the terms of service under which the assessee is entitled for reimbursement for 50 litres of petrol every month is also not filed before this Tribunal. The assessee relied upon the following two decisions to buttress his case: While the Income-tax Officer, Ward 4(5), Hyderabad had completed the assessment under Section 143(3) of the Income-tax Act by his order dated 21-12 1988 whereunder he had arrived at the total income of the assessee at Rs. 36,370. He had taken only Rs. 13,195 as Income from other sources which comprises interest on National Savings Certificates of Rs. 12,570 and interest on bank deposits of Rs. 625. Having been aggrieved, the assessee went in appeal before the Dy. Commissioner (Appeals). It is claimed that the Income-tax Officer disallowed the claim of deduction of Rs. 12,570 towards depreciation and the interest of Rs. 647.10 on the loan taken for the purchase of the car, without assigning any reason whatsoever in the assessment order. The Dy.
Commissioner (Appeals) also by his impugned order dated 30-3-1990 rejected the claim of the assessee. It was claimed before the Dy.
Commissioner (Appeals) that the sum of Rs. 8,400 received towards rent paid for the use of the car for the year under consideration should be deemed to be income from other sources. Against that income the sum of Rs. 21,166 should be allowed as depreciation. The Dy. Commissioner (Appeals) rejected the said contention and he held that in the statements enclosed to the income-tax return, the sum of Rs. 8,400 received from the bank towards reimbursement of petrol bills was never indicated anywhere. It is brought only in the appeal memo just to support the claim of depreciation of Rs. 21,166. The contention of the assessee that deduction should be allowed under Section 57(iii) cannot be accepted. Depreciation on car, held the Dy. Commissioner (Appeals), could be allowed only where the assessee was deriving income from either profession or business. The assessee had shown Rs. 8,400 towards hire charges only to claim depreciation. The assessee has already been allowed standard deduction under Section 16(i). The claim of the assessee was held not allowable and hence it is dismissed.
5. I have heard Shri V. Padmanabhan, learned Counsel for the assessee and Shri C.V. Surya Prakash Rao, the learned departmental representative. Firstly the contention of the assessee was that he had received Rs. 8,400 towards hire charges from the bank. Though it was to be shown under the head other sources in his Income-tax return, by mistake it was not shown like that. That by itself would not disentitle him to claim depreciation. No iota of evidence that the assessee was paid Rs. 8,400 towards hire charges by the bank was there. At least bank certificate to show that so much of hire charges was paid was not produced before this Tribunal or before the lower authorities. If it is a fact it would have certainly be brought to the notice of the Income-tax Officer by mentioning same as one of the items of income under the head 'other sources' in the income-tax statement. However, the very fact that no such mention is made in the income-tax statement would speak volumes about the truth of such receipt and it being constituted as income from other sources.
6. Next let us take up the reimbursement of petrol bills. It is the case of the assessee that he used to submit petrol bills every month far exceeding 50 litres limit. However, the bank used to reimburse only 50 litres. The question is whether such reimbursement can be termed as a benefit or a perquisite and whether it can be taken or considered as an item of income under Section 2(24)(iiia) which is as follows: any special allowance or benefit, other than perquisite included under sub-clause (iii), specifically granted to the assessee to meet expenses wholly, necessarily and exclusively for the performance of the duties of an officer or employment of profit: 7. In CITv. S. G. Pgnatale [ 1980] 124 ITR 391 the question which cropped up before the Gujarat High Court was whether living allowance received by a French national deputed by his employer company to work in India is of income nature or not in his hands. It was contended on behalf of the revenue that it was a perquisite in his hands. It has been held therein that living allowance cannot be considered to be either income of the assessee or it can partake the character of a perquisite. The Gujarat High Court following the principle laid down by the House of Lords in Owen v. Pook (Inspector of Taxes) [1969] 74 ITR 147 held that a perquisite is something which arises by reason of a personal advantage but the word "perquisite" would not apply to a mere reimbursement of a necessary disbursement. Recognising the fact the monies would go to the pocket of the assessee, still it cannot be held to be a perquisite, Their Lordship held the following at page 403: It is true that the money would go to the assessee and would go to the pocket of the assessee, but since this is by way of reimbursement, it would not be perquisite, therefore, not salary and, therefore, not chargeable under the head 'Salaries' under this Act.
Thus reimbursement of living allowance was held to be either part of salary or part of perquisite. The amount reimbursed towards petrol bill charges would be allowable as part of deduction in the hands of the bank, employer of the assessee. At the same time this payment does not secure any benefit or perquisite to the assessee since it is a mere reimbursement of the expenditure. Unless some benefit or perquisite results, it cannot be considered as income of the assessee at all. The real situation when analysed would show that the obligation to pay for petrol bills up to an extent of 50 litres was undertaken by the bank and in fact the petrol was consumed for purpose of the bank during the course of discharge of official duties of the assessee. The tours undertaken by the assessee was on behalf of the bank. Therefore, the liability to incur expenditure on petrol is that of the bank. While reimbursing the petrol bills, the bank was only fulfilling its own obligation to meet such expenditure. I am unable to understand under these circumstances how the reimbursement of petrol bills can be considered to be a perquisite or benefit or advantage to the assessee.
If it is not a benefit or perquisite to the assessee, it cannot be considered to be income at all in the hands of the assessee. Unless it is income under the head other sources, the claim for depreciation of car as deduction from out of the said income does not arise. No doubt the assessee has been earning other items of income under the head other sources. For instance, he is earning interest income on National Savings Certificates and also earning bank interest on bank deposits made. However, the interest income derived by him has no correlation or direct relationship between his car or the depreciation claimed on that car. The depreciation can be claimed as the deduction only when the assessee derives some income or offered income from the use of his car.
Since there is no evidence at all worth the name to substantiate the plea that the assessee had derived Rs. 8,400 towards hire charges of the car paid by the bank and since reimbursement of petrol bills does not constitute any perquisite in the hands of the assessee, it cannot be considered to be income within the meaning of Section 2(24)(iiia). I hold that the assessee is not entitled for either any depreciation claim of Rs. 21,166 or the interest amount of Rs. 647.10.
8. The two decisions relied on by the assessee, namely, Rqjendra Prasad Moody's case (supra) and Smt. Archana R. Dhanwatay's case (supra) are clearly distinguishable. In Rqjendra Prasad Moody's case (supra) with borrowed monies equity shares were purchased. In the year under consideration, no dividend income was received but the interest payable on monies borrowed were claimed as deduction under Section 57(iii) of the Income-tax Act. The question was whether deduction under Section 57(iii) is allowable only when income was earned under the head other sources as a result of the expenditure. The Hon'ble Supreme Court held that the Section does not require that this purpose must be fulfilled in order to qualify the expenditure for deduction; it does not say that the expenditure shall be deductible only if any income is made or earned. Only for that limited proposition, the said decision was an authority. Even in the facts of this case it is clearly to be seen that the equity shares were purchased with borrowed monies and so the income likely to be yielded is only dividend income which ultimately has to be taxed under the head other sources. When the resultant income is taxable under the head other sources, the borrowed monies and the interest due thereon constitute necessary expenditure for earning the said income and, therefore, it is an obvious case which is liable to be allowed as deduction under Section 57(iii) of the Income-tax Act.
However, the case on hand is not similar. There is no corresponding income which can be brought to tax under the head other sources. The allegation that the assessee had received Rs. 8,400 towards hire charges was never proved and it is not established as a fact. For that reason, it cannot be considered to be income from other sources.
Reimbursement of petrol bills cannot be either income or perquisite.
For that reason it cannot be considered as income from other sources.
That means there is no income which can be correlated to the use of the car. When there is no income the depreciation on car cannot be allowed under Section 57(iii). The second decision relied on by the assessee, namely, Smt. Archana R. Dhanwatay's case (supra) cannot also come to the aid of the assessee. The ratio of the decision is that deduction should be allowed from the income from other sources although the assessee had not claimed it. However, unless there is corresponding income or likelihood of income which can be correlated to the expenditure, the claim as deduction cannot be allowed.
9. For all the reasons given above, I am of the opinion that the assessee is not entitled for the relief prayed for in this appeal. The appeal is found bereft of any valid grounds and hence it is dismissed.