Sabyasachi Mukharji, J.
1. In this reference under Section 256(1) of the I.T. Act, 1961, two questions have been referred, one at the instance of the assesses and the other at the instance of the Revenue. It is better to deal with the question referred at the instance of the Revenue. The question is as follows :
'Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the reimbursement by the assessee of the medical expenses incurred by its employees did not result directly or indirectly in the provision of any benefit or amenity or perquisite to theemployees within the meaning of Section 40(c)(iii) of the Income-tax Act 1961?'
2. The ITO in this assessment had included medical allowance paid to the employees in the computation for the purpose of disallowance under Section 40(c)(in) of the I.T. Act, 1961, In the appeal before the AAC, following his predecessor's order, he confirmed the action of the ITO. When the matter went up in appeal before the Tribunal, it was submitted on behalf of the assessee that the medical bills of the employees were reimbursed and were paid in cash. These could not be treated as benefit or amenity or perquisite falling within the meaning of Section 40(c)(iii) of the I.T. Act, 1961. The Tribunal accepted this contention following the decision of the Tribunal for the previous year. On the construction of the section we are of the opinion that the Tribunal was right. This view which we are taking is in consonance with the view expressed by this court in Income-tax Reference No. 254 of 1979 (Indian Leaf Tobacco Development Co. Ltd. v. CIT) (judgment delivered on 10th August, 1981) : [1982]137ITR827(Cal) .
3. For the reasons aforesaid and on the construction of the section and in the facts and circumstances of this case, we are, therefore, of the opinion that the Tribunal came to the correct conclusion on this aspect of the matter and thereafter has referred this question at the instance of the Revenue to this court and we, therefore, answer the question in the affirmative and in favour of the assessee. In this connection, reference may also be made, though not directly on this point, to the decision of this court in the case of CIT v. Kanan Devan Hills Produce Co. Ltd. : [1979]119ITR431(Cal) .
4. It is now necessary to deal with the next question, which is at the instance of the assessee. The question is as follows :
'Whether, on the facts and in the circumstances of the case, and according to a correct construction of the law, the Tribunal was right in holding that for the purpose of Explanation 2 to Section 43(1) of the Income-tax Act, 1961, the actual cost of the two cranes to the assessee was Rs. 93,779 ?'
5. The assessment year involved is 1967-68, for which the previous year was the accounting period ending on 31st December, 1966. The assessee in 1965 imported two mobile cranes from the United Kingdom which had been given to the assessee by its parent company as a gift. Both the cranes were put to use by the assessee in the year under consideration. In its balance-sheet the assessee had shown the value of these cranes at Rs. 4,50,000. The two cranes were offered to the assessee by its parent company by its letter dated 31st July, 1964, stating that it had a fleet of constructional plant on account of volume of work that it had in the late 1950s and as there was reduction in that work on which part of its surplusequipment was in a very good condition. The parent company further stated that they desired to make a free gift of the two cranes to the assessee to assist in its work and requested the assessee to obtain necessary licence for the import of the two cranes to India. It would be necessary to refer to the licence issued in this connection for the import of these cranes. The licence was numbered as P/CC/2346326 and in the licence it was stated that it was for customs purpose only. Under col. 6 there was an approximate value--C.I.F. value (in figures and words), of only Rs. 67,027. The special condition attached to the licence were as follows :
'The goods for import of which this licence has been granted shall be the property of licensee at the time of clearance through customs.
This licence is issued subject to the condition that the goods against it will be utilised by the licensee and will not be sold or disposed of otherwise.'
6. This condition is important in order, to decide the marketability of these goods.
7. The parent company had disclosed the value of the two cranes which were gifted to the assessee at 5,027 for the purpose of customs clearance. The assessee moved the Department for necessary import licence by showing the value of the two cranes at 5,027 equal to Rs. 67,027. The assessee obtained no objection certificate from tbe Reserve Bank of India showing the value of the two cranes at 5,027 and paid import duties on Rs. 67,027. The assessee incurred expenses amounting to Rs. 26,753 including the import duty of Rs. 19,178. The point for consideration before the ITO was the value of the two cranes for the purpose of allowing the depreciation and development rebate.
8. The relevant section and the Explanation with which we are concerned may, in this connection, be referred to. The relevant section is Section 43(1), Expln. 2, which is as follows :
'43. Definitions of certain terms relevant to income from profits and gains of business or profession.--In Sections 28 to 41 and this section, unless the context otherwise requires--
(1) 'actual cost' means the actual cost of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority :
Provided that where the actual cost of an asset, being a motor car which is acquired by the assessee after the 31st day of March, 1967, but before the 1st day of March, 1975, and is used otherwise than in a business of running it on hire for tourists, exceeds twenty-five thousand rupees, the excess of the actual cost over such amount shall be ignored, and the actual cost thereof shall be taken to be twenty-five thousand rupees....
Explanation 2.--Where an asset is acquired by the assessee by way of gift or inheritance, the actual cost of the asset to the assessee shall be the written down value thereof as in the case of the previous owner for the previous year in which the asset is so acquired or the market value thereof on the date of such acquisition, whichever is the less....'
9. The said Explanation defines the 'actual cost' upon which the depreciation and development rebate is granted under Section 43. The Explanation is quoted above. Therefore, it has to be enquired, in other words, whether in the case of acquisition of assets by the assessee by way of gift or inheritance the 'actual cost' of the assets to the assessee shall be the written down value as in the case of the previous owner for the previous year in which the assets were so acquired or the market value thereof on the date of such acquisition, whichever is less. Therefore, a determination is necessary on two aspects. The written down value to the previous owner in the year in which the asset was acquired by gift or inheritance and, secondly, the market value on the date of such acquisition and then to determine whichever is less, and should be taken as the 'actual cost' for the purpose of computation of the depreciation and development rebate.
10. The ITO asked the assessee to explain as to how it had valued the two cranes at Rs. 4,50,000. The assessee pleaded that the two cranes were imported in 1965 as free gifts from the parent company, but actually had put the two cranes to use in the year under consideration and their value at Rs. 4,50,000 was taken on the basis of the valuer's report. In this connection, it would be appropriate to refer to the valuer's report in respect of the two cranes. In respect of one of these two cranes the valuer is one Sri H.K. Ghose who has described himself as the engineering consultant and valuer (under Govt. of India Gazette) and held a degree of M.I.M.E., M.M.G.I. In his report dated 10th May, 1966, he has stated as follows :
'I have inspected your 3 ton Butter's Tower Crane (travelling on rails)--Sl. No. 6881 at work at your Durgapur site. The machine is practically a stationary one with only a few moving parts, subject to wear and tear.
The machine seems to be as good as new and is in a very good working condition.
If such a machine has to be imported today it will cost round about Rs. 4,00,000 (rupees four lakhs only). If auctioned, it would probably fetch the same price but for valuation purpose, I would value it at Rs. 3,00,000 (rupees three lakhs only).
I, therefore, value the 3 ton Butter's Tower Crane--Sl. No. 6881 at Rs. 3,00,000 (rupees three lakhs only).'
11. In respect of the other crane the report in respect of which was alsodated 10th May, 1966, the said valuer observed as follows:
'I have inspected your MCK 304 Excavator Machine No. 1617--Sl. No. 1795. It seemed to be as good as new and was found to be in goodworking order.
Such a machine, if imported today, will cost round about Rs. 2,00,000(rupees two lakhs only). It will probably fetch the same value, ifauctioned.
For valuation purposes, however, I would like to put its value atRs. 1,50,000 (rupees one lakh fifty thousand only).
I, therefore, value this MCK 304 Excavator at Rs. 1,50,000 (rupeesone lakh fifty thousand only).'
12. Taking these two valuations in respect of the two cranes, the, valuerarrived at the figure of Rs. 4,50,000, which was put by the assessee as the value of the imported goods. The assessee's case before the ITO was, therefore, that though the two cranes were old, yet these were in excellent condition and their market value as on that date on which these were put to use, was Rs. 4,50,000. The assessee also informed the ITO that the two cranes had cost the parent company 15,500 and their written down value, according to the books of the parent company, was 5,700. The ITO was of the view that as the cranes were received by gift the actual cost of the same was to be determined in accordance with the provisions of Section 43(1) read with Expln. 2 of the I.T. Act and, according to the provisions referred to above, the actual Cost would be lesser than the written down value in the hands of the donor or the market value at the time of acquisition of the assets. No depreciation had been allowed on the ground that the cranes had never been used in India prior to the relevant year and the ITO took the view that there was no question of considering the written down value of the cranes for that reason. He, therefore, proceeded to consider the market value of the cranes as the other alternative for determining the actual cost of the same. The ITO, for the reason given by him in his order, did not accept the assessee's valuation report in respect of the two cranes at Rs. 4,50,200. The ITO took the view that as the assessee had itself disclosed the value of the cranes at 5,027 to the various Government authorities, that was the correct value of the two cranes received by the assessee as gift. He, therefore, determined the actual cost of the two cranes on the date of acquisition at Rs. 93,779 by aggregating the amounts of Rs. 67,027 = 5,027 and Rs. 19,178 and Rs. 7,574. The ITO allowed the depreciation and development rebate at the appropriate rates on the same amount of Rs. 93,780.
13. Being aggrieved by the aforesaid order, the assessee went up in appeal before the AAC and the AAC was of the view that the value as shown by the donor could not be taken to be the market value in India and there was no evidence about the market value of the two cranes in India on the date of acquisition. According to him, in the next year, which was the year of installation, the market value was Rs. 4,50,000 as certified by the assessee's approved valuer. The AAC held that the written down value of the two cranes was the original cost of Rs. 2,06,668 to the donor as no depreciation had been allowed under the I.T. Act. It is appropriate in this connection to refer to the relevant portion of the order of the AAC upon which reliance was placed on behalf of the assessee. The AAC observed, inter alia, as follows :
'In view of the above, the A/R contends that the value at the time and place of exportation could be taken for the purposes of the Customs Act and this is the value which was accepted by the customs authorities and what value should be quoted for the purposes of the Indian Customs Act was dictated by the principal company at U.K., who in their letter dated 31st July. 1964, suggested that for customs clearance the value of the cranes should be shown at 5,027 (Rs. 67,027) which appeared to be the W.D.V.. in the books of the U.K. company. The A/R further contends that from the correspondence that passed between the Government of India and the assessee-company for necessary licence and ultimate clearance by the customs authorities, it would appear that the same value of Rs. 67,027 was quoted everywhere. The value which was accepted by the customs authorities in India was the W.D.V. in the books of the U. K. company and customs duty was allowed to be paid on the basis of this value. At best this can be the value at the place of exportation and apparently the customs authorities were satisfied about this. The W.D.V. in the U.K. books cannot, therefore, be taken as the market value in India in the year of acquisition of the assets. The market value in the year of acquisition is not known but it is seen that in the next year, which is the year of installation, the market value was Rs. 4,50,000 as certified by the appellant's approved valuers. Under Explanation 2 as referred to above the ITO is now to consider the W.D.V. of the assets to the previous owner. The W.D.V. has been defined in Section 43 to be the 'original cost' less all depreciations actually allowed under the Indian I.T. Act, 1922, or the I.T. Act, 1961. The U.K. company has never enjoyed depreciation under the I.T. Act of India and, therefore, the original cost should be taken to be the W.D.V. for the purposes of the I.T. Act, 1961. The original cost is 15,500, whose money value in the year of acquisition was Rs. 2,06,667. This being less than the market value of Rs. 4,50,000 or so, depreciation is allowable on a sum of Rs. 2.06.667. The ITOis directed to recalculate the depreciation and development rebate on this amount and revise the assessment accordingly.'
14. Revenue being aggrieved by the aforesaid order went up in appeal before the Tribunal. On behalf of the Revenue, it was submitted before the Tribunal that the AAC had erred in determining the actual cost of the cranes at Rs. 2,06,667 as the original cost to the donor was less than the market value of Rs. 4,50,000 as shown by the assessee. The Tribunal was of the view that the view of the AAC could not be accepted and observed, inter alia, as follows :
'The Tribunal did not accept the report of the assessee's valuer disclosing the market value of the two cranes at Rs. 4,50,000 on the date the same were put to use as it did not agree with the assessee's valuer that the two cranes were as good as new. The Tribunal further observed that in its letter dated 31st July, 1964, the donor company gave the value of the two cranes at 5,027 and it was on this basis of the valuation that the assessee obtained the necessary papers for importing the two cranes into India from the authorities of the Government of India and even paid the customs duty on the basis of that valuation. It further observed that for the purpose of customs duty the value of the goods to be imported was the price at which such goods were ordinarily sold or offered for sale and that in the absence of any other evidence it was to be inferred that the value stated by the donor was the value at which the cranes could ordinarily be sold in U.K. The Tribunal further observed that the W.D.V. in the donor's book was 5,700 and there was no explanation why the value was shown at 5,027. According to the Tribunal this supported the inference that the donor treated the market value of the two cranes in England at 5,027 The Tribunal held that the market value of the two cranes in the hands of the assessee was to be determined on the acquisition and not after the assets had already been acquired. The Tribunal, therefore, further held that the Income-tax Officer was right in determining the market value at Rs. 93,779 and that being the lesser of the original cost to the donor and the cost of acquisition to the assessee was the actual cost to the assessee for the purpose of allowing depreciation and development rebate. The Tribunal accordingly set aside the order of the AAC and restored that of the Income-tax Officer.'
15. It may be mentioned that the Tribunal was of the view that in view of the relevant section for the purpose of determining the actual cost of the assets, it was necessary to determine the written down value of the cranes in the hands of the donor and the 'market value in the hands of the assessee at the time of acquisition of the assets, to find the lesser of the two. In our opinion, the Tribunal was correct in its approach, that is to say, you have to find out the written down value in the hands ofthe donor first and also to determine the written down value in the hands of the assessee at the time of acquisition of the assets and then determine which is the lesser of the two. The Tribunal noted that the original cost to the donor was Rs. 2,06,667 and the Tribunal also accepted the assessee's contention that the written down value in the hands of the donor was 5,700 but as no depreciation had been allowed to the donor, according to the Indian I.T. Act, the Tribunal observed that the written down value remained the original cost to the donor, that is to say, Rs. 2,06,667. Next question that arises for determination in this case is whether the Tribunal was right in rejecting the assessee's contention that the market value of these two cranes was Rs. 4,50,000 on the date of acquisition. A large number of authorities were cited before us in aid of the proposition that though the goods had been imported a year prior to the relevant year, the cost should be taken in the year when it was used or installed. In this connection, reliance was placed on the observations in the case of CIT v. Saraspur Milk : [1959]36ITR580(Bom) and also the observations of the Supreme Court in the case of CIT v. Sri Rama Vilas Service (P.) Ltd. : [1960]38ITR25(Mad) , and in this connection our attention was drawn to the observations of the two previous decisions approved by the Supreme Court, and reliance was placed on the observations of the Supreme Court at p. 168 of the report. For the purpose of this reference, in our opinion, it is not necessary to go into this aspect of the matter. It is necessary primarily for us to determine whether the market value, whichever was the year, assuming that the assessee's contention as the date of acquisition was the actual date of utilisation and user to the assessee has been correctly determined. In this connection, the valuer's report was relied on by the assessee. The valuer's report, as we have set out before, determined the procedure, in the opinion of the valuer, as to the market value.' The valuer considered the condition of the cranes and considered the fact, which according to him, was if the machine was imported today it would have cost roundabout Rs. 4 lakhs and he had considered further that those would have probably fetched the same price and on that basis he had deduced the market value. But- the fundamental question in this case is : were these two cranes marketable at all These two cranes were hedged in by the condition of the licence, that is to say, that these goods could not be sold or disposed of otherwise. Therefore, it is not that these cranes had no market value in India as such. These two cranes had the value given to them by the assessee for the purpose of importation and on these values these goods were obtained in India on payment of customs duty by the assessee. Therefore, the Tribunal relied on, and in our opinion rightly, that this value together with the costs, charges and expenses which were incurred by the assessee.should be taken into account for considering the market value of this kind of goods, that is to say, the goods hedged in with the conditions of licence. This was the evidence and also the assertion of the assessee and as against these, was the view of the valuer which proceeded on the free marketability of these goods, which, we have mentioned, was a major fallacy in the valuer's report. The Tribunal has referred to this aspect of the matter. There is one or two other infirmities which may be pointed out. The valuer's report is not clear as to whether the valuation was made either on the date of importation or on the date of installation. Be that as it may, taking the highest value that can be put to these goods, this is the value upon which the goods could have been imported by the assessee on the condition of the licence, the Revenue has accepted that and rejected the highest value put by the valuer. In our opinion, in so doing, the Tribunal has mot misconstrued the provisions of the section and it cannot be said that the Tribunal has proceeded on any erroneous basis. It was suggested that the depreciation had to be given on the basis of market value and, therefore, we have to imagine the free market for these goods. But we are unable to accept this contention. There may be a market for particular goods, that is to say, the building or the land which are not hedged in with certain limitation by the condition of the lease and the prices of these buildings will be dissimilar to the price of similar buildings hedged in with certain conditions. A good deal of criticism has been made on the observations of the Tribunal that the condition of the goods was irrelevant for a determination of the market value. If looked at in the proper perspective, the Tribunal was using this expression on the question of marketability of these goods, that is to say, the goods which could not be sold but might be used by the importer himself. It is in respect of this type of goods which are not hedged in with any condition that the Tribunal, in our opinion, made the observation that the condition was not a very relevant factor in determining the market value. Therefore, this observation of the Tribunal cannot also be characterised or described as conjecture or irrelevant or erroneous or inconsistent with law. If that is the position, then, in our opinion, the Tribunal having had these two views, viz., the views of the valuer's report as well as the views of the assessee's assertion, upon which these goods were imported, preferred to accept the Revenue's assertion and, in view of the law, proceeded on this basis, it cannot be said that the Tribunal acted illegally or in any erroneous manner or in breach of the principles enunciated in the Explanation. Our attention was also drawn to the fact that under Section 14(1) of the Customs Act, the value of these goods would be deemed to be the value for assessment.
16. The Tribunal has referred to this fact. This, of course, is deemed to be the value of the goods for the purpose of payment of customs duty under the Customs Act. But this, in our opinion, is a relevant factor but may not be the deciding factor in determining the market value of these goods. Though the Tribunal was not in error in referring to that section of the Customs Act, that would not have compelled us to accept the market value of the valuer.
17. An argument was advanced that there being no question of law raised as to the finding of the Tribunal, this aspect of the matter could not be gone into. Reliance in this connection was placed on the observation of the court in the case of Karnani Properties Ltd. v. CIT : [1971]82ITR547(SC) , but this observation was again explained by the Supreme Court in the case of CIT v. S.P. Jain : [1973]87ITR370(SC) . Our attention was also drawn to the observation of the Supreme Court in the case of Stay Co. Ltd. v. CIT : [1970]75ITR179(SC) and in the case of CIT v. Rajasthan Mines Ltd. : [1970]78ITR45(SC) . Argument was advanced as to which report of the valuer was to be accepted, and, on this aspect, decisions, as mentioned before, were cited. In some cases, the valuer's report had been rejected by this court on the ground of certain erroneous principles followed by the valuer. In this connection, reference was made to the observations of the court in the case of CIT v. Smt. Ashima Sinha : [1979]116ITR26(Cal) and also in the case of CIT v. Panchanan Das : [1979]116ITR272(Cal) and also to certain observations of this court made in the case of Sudesh Chandra Talwar v. CWT : [1982]137ITR483(Cal) . But in the view we have taken, it is not necessary for us to go into this aspect of the matter. In an appropriate case, the valuer's report may be rejected on certain materials and it can also be characterised as an expression of an opinion and not an evidence of fact. But on this controversy it is not relevant for us to embark upon in this case.
18. For the reasons aforesaid, we are of the opinion that the Tribunal on this aspect had arrived at a correct conclusion and we, therefore, answer the question referred at the instance of the assessee, in the affirmative and in favour of the Revenue.
19. In the facts and circumstances of the case, the parties will pay and bear their own costs.
C.K. Banerji, J.
20. I agree.