TMI Blog1976 (3) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... anlal, appointed them as the managing directors of the assessee-company in the first instance for a term not exceeding five years with effect from July 1, 1967. As per clause 5 of the said agreement, the assessee-company has, as and by way of remuneration, agreed to pay and provide to each of them, inter alia, a sum not exceeding 1/3rd of 10% on the net annual profits of the company or Rs. 2,000 per month as remuneration subject to certain conditions, and free use of car to be maintained by the company for their personal as well as business use of the company and also the expenses in respect of the telephones to be maintained at their respective residences. In the relevant assessment year under reference, the assessee-company paid remunerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions contained in section 40(c) were applicable in cases of the expenses incurred on account of directors since that was the clause which specifically dealt with the type of the expenses incurred by the company in respect of its directors and section 40(a)(v) would not be attracted since the particular enactment of a statute should prevail over its general enactment. In that view of the matter, the Tribunal allowed the appeal of the assessee-company. At the instance of the Commissioner of Income-tax, the following question has been referred to us for our opinion by the Appellate Tribunal: "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that section 40(a)(v) was not applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... month or part thereof comprised in the period of his employment during the previous year, whichever is less:....... (c) in the case of any company- (i) any expenditure which results directly or indirectly in the provision of any remuneration or benefit or amenity to a director or to a person who has a substantial interest in the company or to a relative of the director or of such person, as the case may be, (ii) any expenditure or allowance in respect of any assets of the company used by any person referred to in sub-clause (i) either wholly or partly for his own purposes or benefit, if in the opinion of the Income-tax Officer any such expenditure or allowance as is mentioned in sub-clauses (i) and (ii) is excessive or unreasona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a director of a company-assessee is not sought to be done away with by the said amendment. We are of the opinion that the contentions urged on behalf of the assessee are well-founded for two significant reasons: in the first place, the distinction in the matter of deductibility of expenses made by a company in the case of directors and employees before the Finance Act of 1964, or thereafter continues to prevail because in the ultimate analysis the legislature was making different provisions about the amount of expenses which would not be deductible in computing the income chargeable under the head "Profits and gains of business or profession". By the said section 40(c) it, inter alia, provided about the expenses laid out by a company-ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses or allowances made by a company which resulted directly or indirectly in the provision of any remuneration or benefit or amenity to a director or to a person who is substantially interested in the company or to the relative of the director or of such person, as the case may be, on the one hand and the expenses which resulted directly or indirectly in the provision of any benefit or amenity or perquisite to an employee of a company remained intact. The contention urged on behalf of the revenue that non-deduction of such expenses in the case of a company employee has been by the amending Act of 1968, sought to be enlarged and made applicable in cases of the employees, of all other assessees, (sic) does not, in our opinion, answer the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions of deduction thereof qua each of the heads. Sub-clause (v) accordingly deals with the head of expenses for providing benefit, amenity or perquisite. For the same head, namely, benefit, amenity and perquisite, clause (c) of section 40 also prescribes conditions under which the expenses incurred on that head are entitled to be deducted. The contention of the revenue that clauses (a)(v) and (c) of section 40 operate in different fields does not appear to be well-founded, because they are dealing with the same broad head, namely, amenity, benefit and perquisite, though none the less they prescribe conditions in respect of different sub-heads, namely, the case of employees or directors. The view of the Tribunal that when there is a gen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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