C.I.T.,BOMBAY CITY-III,BOMBAY vs BRITISH BANK OF MIDDLE EAST

The Supreme Court addressed the interpretation of Section 40A(5) of the Income Tax Act, 1961, and Rule 3(c) of the Income Tax Rules, 1962, regarding the valuation of perquisites for disallowance purposes. The Court held that when actual expenditure on providing a car to an employee is not ascertainable, the disallowance should be based on Rule 3(c), which prescribes the value of perquisites. The Court affirmed the High Court's decision in favor of the assessee, establishing that Rule 3(c) is applicable in determining disallowance under Section 40A(5).