TMI Blog1995 (4) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... newly acquired truck No. RSJ-3745 was excessive (Rs. 64,233) as compared to tyre expenses of various old trucks. The AO noted that the expenditure was incurred within a period of 10 months of the acquisition of the truck. He disallowed a sum of Rs. 10,000 on estimate basis. The assessee went in appeal before the learned CIT(A) but, however, failed to meet with any success. 2.1 The learned authorised representative submitted that the authorities below misread the facts and, therefore, reached erroneous conclusion. He submitted that the truck was acquired during the relevant previous year and as per invoice dt. 25th July, 1984 the truck was supplied with four nylon tyres as against 7 wheels supplied and two of the tyres were of 14 ply (fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round No. 3 is that the Assessing Officer is wrong in disallowing a sum of Rs. 14,737 on account of rent of director-employees. It is the claim of the assessee that this payment, including the other remuneration are much within the limits prescribed under s. 40(c) of the IT Act. The AO made disallowance of Rs. 80,246 under s. 40A(5)(c) being related to remuneration to directors Rs. 14,737 and staff salaries Rs. 65,509. With regard to Rs. 14,737 it was claimed that the amount could not be included while computing assessee's income since the total remuneration of directors even after including the above amount did not exceed the limit of Rs. 1,02,000 per annum prescribed under s. 40(c) of the Act. The AO and the learned CIT(A) both did not ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... splaced, inasmuch as, it has been held that the provisions of s. 40(c) do not apply in respect of employee-directors who were posted outside India and such a case is dealt with only by s. 40A(5)(b). On the other hand, a large number of High Courts have taken the view that in the case of directors who may also be employees of the company, the provisions of s. 40(c) of the IT Act would be applicable while computing the income of the company. We may refer to the judgment of Calcutta High court in the case of CIT vs. India Molasses Co. (P) Ltd. (1989) 77 CTR (Cal) 112 : (1989) 176 ITR 473 (Cal) and Peico Electronics Electricals Ltd. vs. CIT (1993) 201 ITR 477 (Cal) and Gujarat High Court in Addl. CIT vs. Tarun Commercial Mills Ltd. 1977 CTR ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards House Rent Allowance are not perquisite but are part of salary. On these facts and under these circumstances we allow this ground of appeal also. 7. In the result, assessee's appeal is partly allowed. 8. The only grievance of the Revenue in its appeal is that the learned CIT(A) erred in deleting the addition of Rs. 95,286 which was rightly made by the AO out of expenses under the head customers claim. The claim of the assessee was disallowed by the AO for the reasons that the same pertained to earlier years and the assessee was following mercantile system of accounting and accordingly he considered only the date of issue of goods receipt and concluded that the claim of pertained to earlier years. In appeal the learned CIT(A) e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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