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Judgment
The Income Tax Appellate Tribunal, Meerut, has referred following question Of law u/s 256(1) of the Income Tax Act., 1961 (hereinafter 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 Income Tax 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 are ticket to the family of one of his director Sri Mohit Kunrar.
The assessing authority had disallowed a sum of Rs. 18,156 u/s 40A(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
121,560
12,560
12,560
1/5th of salary
10,560
7,440
6,480
2,000
5,120
6,080
Shri Mohit Kuniar 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 upheld 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 overall limit of Rs. 72,000 %vas not exceeded, no separate disallowance could be made in respect of perquisites.
Heard Sri A.K. 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 CIT v. Indian Eng. & Commercial Corlm. (P) Ltd. (1993) 201 ITR 7231 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 for the higher of 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 tile 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 reventic. However, there shall be no order as to costs.