Cit Vs. Bahami Prints (P.) Ltd. - Court Judgment

SooperKanoon Citationsooperkanoon.com/707921
SubjectDirect Taxation
CourtDelhi High Court
Decided OnFeb-26-2004
Case NumberIT Reference Nos. 363 and 379 of 1984 26 February 2004
Reported in[2005]142TAXMAN348(Delhi)
AppellantCit
RespondentBahami Prints (P.) Ltd.
Advocates: Prem Lata Bansal, for the Revenue;S.K. Khaitan for the assessed
Excerpt:
head note: income tax business disallowance under section 40(c)--perquisite to directorspaid in excess of prescribed limitsheld: in case of directors who are also employees of company, provisions of both sections 40(c) and 40a(5) will be attracted and the higher of the two ceilings has to be applied. the higher ceiling being section 40(c) was thus correctly applied by the tribunal. income tax act, 1961 s.40(c) income tax act, 1961 s.40a(5) in the delhi high court b.c. patel, cj. & badar durrez ahmed, j. - b.c. patel, cj. these two references are at the instance of the revenue. the question raised being common in both the cases, the references are being disposed of by this common judgment and/or order. in it reference no. 379 of 1984, the question framed is as under:-'whether on the facts and in the circumstances of the case, the tribunal is correct in law in holding that the provisions of section 40(c) and not section 40a(5) are applicable to the director employees and on that ground deleting the disallowance of perquisites provided by the assessed company to its directors in excess of the limits permitted in section 40a)?'2. it reference no. 363 of 1984 also raises the same question. we are not required to deal with these matters in detail since the issue is covered by the decision of the supreme court in the case of cit v. indian engg. & commercial corpn. (p) ltd. : [1993]201itr723(sc) , wherein the supreme court, while dismissing the department's appeal, held as under:-'the employees concerned herein also happen to be directors. the provision in clause (c) of section 40 applies to directors among others. of course, section 40(c) is applicable only to companies whereas section 40a(5) is applicable to employees whether of companies or others. in the case of directors who are also employees, both the provisions will be attracted - the higher of the two ceilings has to be applied.' (p. 728)3. in the instant case, the higher ceiling is under section 40(c) and the same has been applied by the tribunal.4. accordingly, the references are disposed in favor of the assessed and against the revenue.
Judgment:

B.C. Patel, CJ.

These two references are at the instance of the revenue. The question raised being common in both the cases, the references are being disposed of by this common judgment and/or order. In IT Reference No. 379 of 1984, the question framed is as under:-

'Whether on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the provisions of section 40(c) and not section 40A(5) are applicable to the director employees and on that ground deleting the disallowance of perquisites provided by the assessed company to its directors in excess of the limits permitted in section 40A)?'

2. IT Reference No. 363 of 1984 also raises the same question. We are not required to deal with these matters in detail since the issue is covered by the decision of the Supreme Court in the case of CIT v. Indian Engg. & Commercial Corpn. (P) Ltd. : [1993]201ITR723(SC) , wherein the Supreme Court, while dismissing the department's appeal, held as under:-

'The employees concerned herein also happen to be directors. The provision in clause (c) of section 40 applies to directors among others. Of course, section 40(c) is applicable only to companies whereas section 40A(5) is applicable to employees whether of companies or others. In the case of directors who are also employees, both the provisions will be attracted - the higher of the two ceilings has to be applied.' (p. 728)

3. In the instant case, the higher ceiling is under section 40(c) and the same has been applied by the Tribunal.

4. Accordingly, the references are disposed in favor of the assessed and against the revenue.