TMI Blog1994 (6) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Officer disallowed the expenditure in excess of Rs. 72,000, the limit as per section 40(c) of the Act. The Commissioner confirmed the disallowance. The company preferred an appeal before the Tribunal and urged that though sitting fees, reimbursement of medical expenses, provision for personal accident benefit, insurance, etc., to the managing director qualified for deduction under section 37 of the Act as expenditure falling under the head "Profits and gains of business or profession", the limitations under section 40(c)(i) and (ii) are not applicable to it. The Tribunal has said that the maximum expenditure admissible in the case of a managing director is Rs. 72,000 per annum and thus any amount in excess thereof was beyond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Legislature had removed the expression "remuneration" from sub-clause (iii) of clause (c) of section 40 of the Act. The expression "remuneration", however, was not removed from sub-clauses (i) and (ii) of clause (c) of section 40 of the Act. A Full Bench of the Kerala High Court in the case of CIT v. Commonwealth Trust Ltd. [1982] 135 ITR 19 has taken notice of the various provisions of the Act including sections 37 and 40 and the definition of the expression "salary" for the purposes of the Act and has said as follows (at page 26): "The definition indicates that salary would include dearness allowance (if the terms of employment so provide), but all other allowances and perquisites stand excluded from the scope of the term 'salary'. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctively deter an assessee from paying anything in excess of one-fifth of the salary by way of benefits, perquisites and amenities, the object being that it is not possible to conceive any category of benefit--the term 'benefit' is used in a wider sense--accruing to an employee other than the salary outside the scope of the term 'benefit, amenity or perquisite'. It is evident that the enumeration of benefit, amenity and perquisite is intended to cover exhaustively all that an employee may get in any form other than his salary. In other words, between salary on the one hand, and benefit, amenity or perquisite on the other whatever an employee would get from his employer in cash or kind or services must stand exhausted. It may not be necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of money which may fall normally within any one of these three must stand excluded. We notice that this argument succeeded before the Karnataka High Court in CIT v. Mysore Commercial Union Ltd. [1980] 126 ITR 340, before the Calcutta High Court in CIT v. Kanan Devan Hills Produce Co. Ltd. [1979] 119 ITR 431 and before the Madras High Court in CIT v. Manjushree Plantations Ltd. [1980] 125 ITR 150. Though reference is made by the counsel for the assessee to the decision of the Madras High Court in CIT v. G. Venkataraman [1978] 111 ITR 444, that could easily be explained because the language of the section which the court considered in that case was materially different from what we are dealing with here. We don't see any reason to gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney. That would be immaterial. According to us, this would be the proper reading of the section." We are in complete agreement with the meaning as given by the Kerala High Court. It is not possible to accept the approach of the Calcutta High Court as the same will defeat the very purpose of the legislation, and give a free hand to the employer to show payments in cash to employees in the shape of various allowances and escape taxes. This also is the view of the Gujarat High Court in the case of Alembic Glass Industries Ltd. v. CIT [1994] 205 ITR 200. The Gujarat High Court has also taken pains in the instant judgment to discuss the fact of the later amendments in the Act and finally has said that "remuneration" is the expression which wou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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