( 1 ) THE facts found and/or admitted in these proceedings are shortly as follows: m/s. Kanan Devan Hills Produce Company Ltd. , Calcutta, the assessee, has been carrying on business in cultivation, manufacture and sale of tea. In the assessment years 1966-67 and 1967-68, the corresponding previous years being the calendar years ending on 30th November of 1965 and 1966, respectively, the assessee claimed deduction, inter alia, of amounts paid as " overseas allowance ", " managing allowance ", " devaluation allowance " and " transport allowance " to some of its employees, in the computation of its business profits and income. It was contended that these items did not represent any benefit or amenity or perquisite within the meaning of Section 40 (c) (iii) of the I. T. Act, 1961, as it stood at the relevant time and were fully deductible.

( 2 ) THE ITO rejected the claim of the assessee and added back 40% of the amounts claimed.

( 3 ) BEING aggrieved by the additions the assessee preferred appeals therefrom. The AAC accepted the contentions of the assessee and held that on a proper construction of Section 40 (c) (iii) the allowance in question paid directly to