Commissioner of Income Tax vs Photographic (P.) Ltd.

The question of law referred to us u/s 256(1) of the income tax Act, 1961 reads as follows:- Whether on the facts and in the circumstances of the case, the income tax Appellate Tribunal is right in law in holding that in view of the first proviso to section 40A(5) the overall limit of Rs. 72,000 as laid down in section 40A(5)(c)(ii) of the income tax Act, 1961?

The admitted position is that the employees of the assessee who were Directors in the assessee were paid salary and perquisites. 2. The Supreme Court in Commissioner of Income Tax, Bombay Vs. M/s. Indian Engineering and Commercial Corporation Pvt. Ltd., has held that if the employee is a Director, then as against section 40(c) and section 40A(5) of the income tax Act, 1961, both the provisions will be applicable for the purposes of deduction in the hands of the assessee company and the higher of the two ceilings has to be applied. Following the view taken by the Supreme Court, we answer the reference accordingly.