AJIT K. SENGUPTA, J. ( 1 ) IN this reference under Section 256 (1) of the Income-tax Act, 1961, for the assessment year 1977-78, the following question of law has been referred to this court :" Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting Rs. 43,700 added by the Income-tax Officer under Section 4ga{5) of the Income-tax Act, 1961, on the sale of the assessee-company's motor cars to its employees at concessional rate ?" ( 2 ) THE facts relating to this reference are that the assessee sold seven of its old cars to its employees at more or less the written down value of such cars. The said cars were purchased during the period 1967 to 1971. The Income-tax Officer took the view that the fair market value at which the said cars could be sold was much higher and he was of the view that the fair market value at which the said cars could be sold was Rs. 77,500. Deducting therefrom the purchase price of Rs. 33,740, the Income-tax Officer treated the difference of Rs. 43,760 as perquisite for the purposes of determining the limits under Section 40a (5) of the Income-tax Act, 1961. ( 3 ) THE Commissioner of Income-tax (Appeals), however, was of the view that the inclusion of the said amount under Section 40a (5) of the Act was not permissible under the Act as there was no expenditure incurred in the said case during the relevant year. In other words, the company did not incur any expenditure, directly or indirectly, in providing any perquisite to the employees. ( 4 ) THE Tribunal also upheld the decision of the. Commissioner of Income-tax (Appeals ). ( 5 ) SECTION 40a (5) of the Act applies only in a case where the assessee incurs any expenditure which results directly or indirectly in the provision of any perquisite (whether convertible into money or not) to an employee or incurs directly or indirectly any expenditure in respect of any asset of the as'sessee used by an employee either wholly or partly for his own purpose or his benefit. Therefore, in order that Section 40a (5) of the Act may apply, the assessee must have incurred an expenditure during the relevant year which results directly or indirectly in the provision of any perquisite. Therefore, in order that Section 40a (5) of the Act may apply, the assessee must have incurred an expenditure during the relevant year which results directly or indirectly in the provision of any perquisite. When the assessee has sold the motor cars at a concessional rate during this year, the assessee has not incurred any expenditure whatsoever during the relevant year in respect of the motor cars which had been sold at their written down value during the relevant year. The motor cars were purchased not in the relevant accounting year but in the earlier years between 1967 and 1971. Hence, the essential condition for the application of Section 40a (5) of the Act is not satisfied in the present case. ( 6 ) REFERENCE may, in this connection, be made to the decision of the Madras High Court in CIT v. A K. Subbaraya Chetty and Sons [1980] 123 ITR 592. In that case, the assessee-firm sold goods to another firm in which one of the partners of the assessee-firm was also a partner and the minor sons of the other partners were admitted to the benefits of the partnership. In the bills raised by the assessee-firm on the other firm, a discount of six per cent. of the sale price was given and only the net amount was payable and taken to the sales account. The Income-tax Officer disallowed the discount because of the close relationship between the two firms and brought the same to assessment applying Section 40a (2) (b) of the Act. The Madras High Court held that, having regard to the close relationship between the partners of the two firms, Section 40a (2) (b) of the Act would apply. But, in view of the finding of the Tribunal that the assessee has charged only the net price and not paid out or away from the sale price or the income that had accrued to it, there was no " expenditure " which could be disallowed under Section 40a (2) (a) of the Act. In other words, when the assessee was charging the price after allowing the discount of six per cent. , the allowance of discount of six per cent. did not constitute an expenditure and, hence, Section 40a (2) (a) of the Act could not be made applicable. In other words, when the assessee was charging the price after allowing the discount of six per cent. , the allowance of discount of six per cent. did not constitute an expenditure and, hence, Section 40a (2) (a) of the Act could not be made applicable. ( 7 ) THE same view has been taken by the Madhya Pradesh High Court in the case of CIT v. Udhoji Shrikrishnadas. ( 8 ) REFERENCE may also, in this connection, be made to the decision of the Andhra Pradesh High Court in CIT v. Vazir Sultan Tobacco Co. Ltd. [1988] 173 ITR 290. In that case, the assessee advanced loans to its employees at a concessional rate of interest. The Department wanted to treat the difference between the concessional rate of interest and the market rate of interest on loans advanced to employees for building houses as a perquisite for the purposes of Section 40a (5) of the Act. Repelling the contention of the Department, it was held that, by advancement of loans at a concessional rate of interest, the assessee is not incurring any expenditure which can be disallowed under Section 40a (5) of the Act. ( 9 ) IN our view, the same reasoning would be equally applicable in the present case. When the assessee in the present case is selling the old cars at their written down value, there is no expenditure incurred by the assessee during their relevant year which could be said to have resulted in the provision of any perquisite. Hence, Section 40a (5) of the Act cannot have any application. ( 10 ) FOR the reasons aforesaid, we answer the question in this reference in the affirmative and in favour of the assessee. There will be no order as to costs.