1. This is an appeal against the order of the AAC confirming certain disallowance made in the assessment for the assessment year 1977-78.
2. The assessee is an employee in a spinning mill. He has also income from property. He had the use of the company's car for a month during the accounting year relevant to the assessment year under consideration. He was, however, charged a sum of Rs. 150 for such personal use. The assessee claimed that since he has used the car for personal purpose only for one month and that too against payment, he should be allowed standard deduction at 11/12th of Rs. 3,000 and not merely at Rs. 1,000 as allowed by the ITO. This ground was rejected by the first appellate authority, as according to him, Section 16(i) of the Income-tax Act, 1961 ("the Act") does not contemplate pro rata deduction as claimed by the assessee. It is argued on behalf of the assessee that the request made by the assessee is eminently reasonable.
In as much as, he has paid for personal use, he is entitled to standard deduction on a pro rata basis. The learned departmental representative, however, claimed that the language of Section 16(r) does not permit pro rata allowance.
3. We have carefully considered the records as well as arguments. The assessee was provided with a car only for a month for official purposes. However, it was not unavailable for personal use and it was for this reason that the perquisite value of Rs. 150 was estimated and added by the employer as the assessee's salary as per certificate from the employer. For the rest of the year, the assessee had not used the car. It does not stand to reason that the assessee should be deprived of the higher standard deduction at Rs. 3,000 for the entire year, simply because he did not satisfy the condition for such higher standard deduction for a period of one month. The assessee has also been reasonable and has claimed only a pro rata allowance and not full allowance on the ground that he satisfied the conditions for higher standard deduction for a substantial period. We do not find any bar for the pro rata allowance under the statute, though there has been no specific provision in this regard. The scheme of the standard deduction under Section 16(7) is that the assessee should not get the higher deduction only if he is in receipt of conveyance allowance which is not taxable, or has free use of the car provided by the employer. This spirit of the claim as well as the language of Section 16(i), in our opinion, would warrant the allowance of standard deduction on a pro rata basis as claimed by the assessee. In the facts and circumstances of the case, the appeal on this point, therefore, succeeds.
4. The second ground relates to the claim of disallowance of interest to the extent of Rs. 1,200, paid to his son G. Rajendran on the loan taken from the assessee. The claim was disallowed only on the ground that the loan was taken to purchase the site and not for putting up the building. According to the authorities, interest is allowable against income from property under Section 24(1)(vi) of the Act, which authorise a deduction of the amount of interest payable on borrowed capital "where the property has been acquired, constructed, repaired, renewed or re-constructed" with such borrowed capital. The word "acquired" in Section 24(1 )(v) would certainly comprehend the purchase of sites. We are unable to hold that "property" would comprehend only the building part of such property and not the site on which it is constructed. The view of" the authorities is too narrow and not justified by either the language or the purposes of the deduction.
Hence, the appeal on this point also succeeds.