Circular No. 62

Limit on allowance in respect of benefit, amenity or perquisite under clause (c)(iii)/clause (a)(v) - Reimbursement of certain expenses/pay-ments whether form part of perquisite to be restricted to one-fifth of salary

What this is

Circular No. 62 was issued by the Central Board of Direct Taxes on 29 June 1971. Its subject is Limit on allowance in respect of benefit, amenity or perquisite under clause (c)(iii)/clause (a)(v) - Reimbursement of certain expenses/pay-ments whether form part of perquisite to be restricted to one-fifth of salary.

What it does

Withdraws two earlier instructions on the ceiling for benefits, amenities and perquisites. Circular No. 32 dated 29 October 1969 and Departmental Circular No. 30-D(LVIII-34) dated 7 November 1966, both annexed to this circular, had told officers how the disallowance of expenditure on benefits, amenities and perquisites restricted to one-fifth of salary was to be worked, and whether reimbursement of certain expenses and payments formed part of the perquisite. The Board is advised that the instructions in them are not in conformity with the provisions of law, withdraws both with immediate effect, and asks that this be brought to the notice of the assessing officers without delay.

Why it was issued

The Board was advised that the two earlier circulars did not conform to the law, and it withdrew them rather than let officers continue to follow them.

Who it reaches

Employers whose perquisite expenditure was being disallowed on the earlier basis
Assessing Officers applying the one-fifth of salary ceiling
Assessees who had relied on the withdrawn circulars in earlier years

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

Limit on allowance in respect of benefit, amenity or perquisite under clause (c)(iii)/clause (a)(v) - Reimbursement of certain expenses/pay-ments whether form part of perquisite to be restricted to one-fifth of salary
CIRCULAR NO. 62, DATED 29-6-1971
Reference is invited to Circular No. 32 issued by the Board on 29-10-1969 [printed here as Annex II] and Departmental Circular No. 30-D(LVIII-34), dated 7-11-1966. [printed here as Annex III]
The Board are advised that the instructions contained therein are not in conformity with the provisions of law.
Accordingly, Circular No. 32, dated 29-10-1969 and Departmental Circular No. 30-D of 1966, dated 7-11-1966 are hereby withdrawn with immediate effect.
The above instructions may please be brought to the notice of the assessing officers without delay.

What to watch

The withdrawal is with immediate effect, so the earlier circulars cannot be relied on for the period after this circular.
No substitute working is given; the ceiling has to be applied on the words of the provision itself.
The circular says only that the earlier instructions did not conform to law, and does not say which reading is right.
What the withdrawn circulars said survives only in the annexures to this text, and is of historical interest for earlier years.

Where you meet it

In an old assessment where a disallowance of perquisite expenditure is defended on the strength of a 1966 or 1969 instruction.

← Circular No. 63 · Circular No. 61 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.