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C.I.T. v. M/S E(Ind) Ltd. - INCOME TAX REFERENCE No. 92 of 1992  RD-AH 405 (14 February 2005)
Income Tax Reference No. 92 of 1992
The Commissioner of Income Tax, Meerut
M/s Electra (India) Limited, Meerut
Hon'ble R.K.Agarwal, J.
Hon'ble Prakash Krishna, J.
The Income Tax Appellate Tribunal, Meerut has referred following question of law under section 256 (1) of the Income Tax Act, 1961 ( here in after referred to as the Act) for opinion to this Court:
"(1) Whether on the facts and in the circumstances of the case, the Tribunal, was correct in confirming the deletion of addition of Rs.18,165/- in view of first proviso to section 40A (5) of I.T.Act, 1961 "
The reference relates to the assessment year 1983- 84.
Briefly stated the facts giving rise to the present reference is as under:
The respondent assessee is a company, which is engaged in the manufacture and sale of transformers. During the assessment year in question it had provided a Car to its Director and also provided Air Fare Ticket to the family of one of his Director Sri Mohit Kumar. The assessing authority had disallowed a sum of Rs.18,156/- under section 40-A(5) (c ) of the Income Tax Act as per the following details:
Ami Chand Jain Rs Mohit Kr. Jain Rs. A.K.Jain Rs.
Car expenses 12,560/- 12,560/- 12,560/-
1/5th of salary 10,560/-2,000/- 7,440/-5,120/- 6,480/-6,080/-
Shri Mohit Kumar has also been provided Air Fare Ticket along with his family for travelling during holidays 4,956/-10,076/-
Feeling aggrieved the respondent preferred an appeal. before the Commissioner of Income tax who has deleted the addition of Rs.12,87,510/-, which order has been up held by the Tribunal on the finding that the total of salary and the perquisites received by each of the employee directors was less than Rs.72,000/-. In view of the first proviso to Section 40A (5) the Tribunal held that in such a case where the over all limit of Rs.72,000/- was not exceeded, no separate disallowance could be made in respect of perquisites.
Heard Sri A.N.Mahajan, Standing Counsel for the Revenue and Sri R.R.Agarwal, appearing on behalf of assessee- respondent.
We find that Supreme Court in the case of Commissioner of Income Tax Vs. Indian Engineering and Commercial Corporation (P) Ltd. 1993 Vol 201 ITR 723 has held that proviso in clause ( c ) of Section 40 of the Act applies to directors and in the case of directors who are also employee both provisions will be attracted and ceiling limit has to be applied. In the present case ceiling of Rs.72,000/- has been fixed in clause (c) of Section 40 of the Act. There was no question of any separate disallowance. We do not find any error in the order of the Tribunal We answer the question of law referred to us in affirmative i.e. in favour of the assessee and against the Revenue. However, there shall be no order as to costs.
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