( 1 ) THIS is a reference, at the instance of the Commissioner of Income Tax, and the Income Tax Appellate Tribunal, Ahmedabad Bench c has referred the following questions under Section 256 (1) of the Income Tax Act, 1961 (for short the Act) :" (1) Whether, in law and on facts the difference between the w. d. v. and the market value of the cars given to the employees was to be treated as a perquisite for working out the disallowance u/s. 40a (5)/40 (c)? (2) Whether, in law and on facts the Tribunal was right in upholding the deletion of the sum of Rs. 52,72,845/- paid as technical design fee to M/s. Weserhutte A. G. West Germany ?"

( 2 ) THE Assessment Year is 1982-83 and the relevant accounting period is calender year ended 31-12-1981.

( 3 ) HEARD Mr. M. R. Bhatt, learned sr. standing counsel on behalf of the applicant - revenue and Mr. B. D. Karia, learned advocate appearing on behalf of the respondent assessee.

( 4 ) IT is common ground between the parties that the second question referred to us stands concluded by an unreported decision of this Court dated 18-01-2001 rendered in I. T. R. No. 49 of 1988 pertaining to Assessment Year 1981-82 in the assesses own case. In the circumstances, it is not necessary to set out facts and contentions in detail. Suffice it to state that the payment as technical design fee for the year under consideration is third installment while the first two installments had come up for consideration in the earlier year. In the earlier year it has been held by this Court that". . . . . we find that know-how was acquired by the assessee on behalf of another Company by the name of Negveli Lignite Corporation. This Company had paid the assessee Company for this know-how and the assessee had further paid the amount to the German Company. The know-how was never utilized by the assessee. Therefore, in our view, the assessee is entitled to the allowance of Rs. 1,12,30,810/- being payments as technical design fees to foreign collaborators. Question No. 2 is answered in the affirmative i. e. in favour of the assessee and against the revenue. "

( 5 ) FOLLOWING the aforesaid finding we answer question No. 2 in the affirmative i. e. in favour of the assessee and against the revenue.

( 6 ) SO far as question No. 1 is concerned, it is noted by the assessing officer that certain employees of the assessee - Company had been given Fiat cars having w. d. v. of Rs. 12,103/= each. The assessing officer estimated the market price of the cars in the year 1981 at Rs. 30,203/= and treated the difference of Rs. 18,000/= per employee as perquisite while working out the disallowance under Section 40a (5)/40 (c) of the Act. The assessee carried the matter in appeal and the C. I. T. (Appeals) deleted the addition on the basis of the decision of special Bench of the Tribunal in the case of KODAK LIMITED Vs. I. A. C. , [1986] 18 ITD 213 (Bom) (SB ). The appeal of the revenue before the Tribunal failed and hence, the present question.

( 7 ) SECTION 40 (c), as is relevant for the present, reads as under :amounts not deductible. 40. Notwithstanding anything to the contrary in sections 30 to 39, the following amounts shall not be deducted in computing the income chargeable under the head "profits and gains of business or profession",- (a) x x x x x (b) x x x x x (c) in the case of any company-- (i) any expenditure which results directly or indirectly in the provision of any remuneration or benefit or amenity to a director or to a person who has a substantial interest in the company or to a relative of the director or of such person, as the case may be, (ii) any expenditure or allowance in respect of any assets of the company used by any person referred to in sub-clause (i) either wholly or partly for his own purposes or benefit,if in the opinion of the Income-tax Officer any such expenditure or allowance as is mentioned in sub-clauses (i) and (ii) is excessive or unreasonable having regard to the legitimate business nee