1989 PLP 226 (PTD)

(d) Income-tax Rules, 1922-- --R. 39(3)(b)--Income-tax Act (XI of 1922), Ss. 7 & 12--Assessee a Director of two Companies working whole time in one and. part-time in another and receiving remuneration from both--Assessee receiving conveyance allowance from Company . for which he worked whole-time--Whether such assessee "employee" of a Company for which he worked whole-time and entitled to the benefit of R. 39(3)(b) to respect of conveyance allowance received by him. The definition of `employee given in sub-rule (3) of Rule 39 of the Rules includes a director of a company. But to get the benefit as an employee a director must fulfil two more conditions; (1) that he should work for one company, and (2) whole-time. A person may be a director of several companies. He may also work whole-time in one Company or part-time in several Companies of which he is a director. If a person does work part-time in several Companies then he cannot be said that he works whole-time for one Company which is prima facie the requirement of Rule

39. The Commissioner of Income-tax, Central Zone `A' v. S. Mazhar Hussain 1988 P T D 563 fol. K. Salahuddin for Appellant. Iqbal Naeem Pasha for Respondent. Date of hearing: 1st December, 1988. SALEEM AKHTAR, J.--The respondent is a Director of two companies namely Atlas Trade Agencies Limited and Atlas Rubber and Plastic Industries Limited. During the assessment year 1973-74 he received remuneration from these companies. In addition he also received conveyance allowance amounting to Rs.36,

000. The Income Tax Officer assessed the respondent under section 12 of the Income Tax Act and conveyance allowance was also brought to charge of tax. The respondent filed an appeal before the Tribunal contending that his income fell under section 7 and therefore he was entitled to exemption for perquisites as provided by Rule 39 of the Income Tax Rules. The appeal was allowed and the respondent was treated as an employee within the meaning of Rule

39. The Department then filed application under section 66 (1) of the Income Tax Act and the Tribunal has referred the following question: "Whether in the facts and circumstances of the case the Tribunal was justified in holding that notwithstanding his being a Director in more than one company, the assessee was a whole time `employee' of one of them within the meaning and purpose of clause 3 (b) of Rule 39 of the Income Tax Rules? Mr. Iqbal Naim Pasha, the learned counsel for the respondent has contended that the question is purely a question of fact in respect of which the Tribunal has given categorical finding. Under section 66 (1) of the Income-Tax Act only question of law arising from 'the order of the Tribunal can be referred. Pure questions of fact cannot be referred by the Tribunal. If a question of fact has been referred by the Tribunal or raised by the party, the Court, can refuse to answer such question. Reference can be made to Munshi Gulab Singh & Sons v. C.I.T. (1946) I T R 66,

83. In a case under section 66 the Court does not interfere with the Tribunal's finding of fact unless it has been specifically challenged inter alia on the ground that it is based on no evidence, or on irrelevant evidence, surmises, doubts and conjectures, or is perverse. Where on such ground the finding of fact is challenged a question of law does arise. Reference can be made to Dhirajlal Girdharilal v. C.I.T. (1954) 26 1 T R 736 and Dhakeshwari Cotton Mills Ltd. v. C.I.T. (1954) 26 I.T.R.

775. Referring to Sree Menakshi Mills Limited v. C.I.T. (1957) 31 1 T R 28 and Oriental Investment Co. Ltd v. C.I.T. (1957) 32 I T R 664 (S.C.), Kanga and Palkhivalla in the Law of Income Tax Vol. 1, Fourth Edition at page 849 observed as follows:- "Where an ultimate finding on an issue is an inference to be drawn from the facts found on the application of any principle of law, there is al mixed question of law and fact, and the inference from the fact found is in such a case, a question of law and is open to review by the Court." Where there exists a mixed question of law and fact the inference drawn from facts is one of law and can be raised in reference. The Tribunal has found that although the respondent is Director of more than one company he was treated as whole-time employee of one of these companies and thus benefits under Rule 39 was given to him. By this question the Department seeks to agitate that on the basis of finding that the respondent was a Director in more than one company the provision of Rule 39 (3)(b) could not be applied. Therefore, it as not purely a question of fact but it is a question where on the basis of fact as found by the Tribunal the legal inference is drawn from applicability of provision of lay which is being challenged. Mr. Salahuddin, the learned counsel for the Department has referred to the Commissioner of Income-Tax Central Zone `A' v. S. Mazhar Hussain 1988 P T D 563 where similar question came for consideration before the Bench and it was observed as follows:- "It is clear from the language of the rule that the definition of `employee' given in sub-rule (3) of Rule 39 of the Rules includes a director of a company. But to get the benefit as an employee a director must fulfil two more conditions, (1) that he should work for one company and (2) whole-time. It was contended by Mr. Shaikh Haider that the respondent worked at least for two companies, and therefore, he was not an employee within the meaning of sub-rule (3) of Rule 39 of the Rules. On the other hand Mr. Iqbal Naeem Pasha submitted that the respondent was working whole-time for Atlas Rubber and Plastic Company Limited in respect of which he claimed exemption for entertainment allowance. In our opinion the stand of Mr. Shaikh Haider is right. A person may be a director of several companies. He may also work whole-time in one company or part time in several companies of which he is a director. If a person does not work part-time in several companies then he cannot be said that he works whole-time for one company which is prima-facie the requirement of Rule 39." We respectfully follow the observation quoted above and applying the same principle to the present case answer the question in the negative. M.B.A./C-61/K Question answered in the negative.