COMMISSIONER OF INCOME TAX vs. M/S HERO CYCLES LTD.

ITA/54/1999HC Punjab & HaryanaPHHC01038368199902 February 20152 pages
AI SummaryDismissed

What were the facts?

The Revenue, Commissioner of Income Tax (Central), Ludhiana, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, dated May 12, 1998. The appeal pertains to the assessment year 1988-89. The dispute involves the disallowance of medical expenses of a director and the disallowance of camp office expenses related to directors' wives accompanying them on business tours. The ITAT had previously ruled on these matters, leading to the present appeal by the Revenue.

What did the High Court hold?

The High Court addressed two substantial questions of law. Regarding the first question concerning the disallowance of medical expenses, the Court noted the assessee's reliance on the High Court's own decision in Porritts & Spencer (Asia) Ltd. Vs. Commissioner of Income Tax, which held medical reimbursement expenses as part of salary covered under Section 40A(5). Consequently, the Court found that this question did not arise for consideration and was answered against the Revenue. For the second question concerning camp office expenses for directors' wives, the Court observed that the Tribunal had made a finding of fact that the wives had accompanied their husbands on business tours. The Court held that such a finding of fact does not give rise to a substantial question of law. Therefore, both substantial questions of law were answered in favour of the assessee and against the Revenue.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was right in holding that the disallowance of medical expenses of a director of the assessee company was not covered under Section 40A(5) of the Income Tax Act, without answering whether reimbursement of medical expenses is part of salary. - Assessee's contention: Relied on this Court's decision in Porritts & Spencer (Asia) Ltd. Vs. Commissioner of Income Tax (2008) 175 Taxman 533, holding that medical reimbursement expenses are part of salary covered under Section 40A(5). - Revenue's contention: Not recorded. 2. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in deleting the disallowance of Camp Office expenses of Rs. 73,694/- without there being any evidence on record that Directors' Wives accompanying their husbands on business tours had any participative role. - Assessee's contention: Not recorded. - Revenue's contention: Relied on judgments of Kerala High Court in Ram Bahadur Thakur Ltd. Vs. Commissioner of Income-Tax (2003) 261 ITR 390 and Bombay High Court in Commissioner of Income-Tax Vs. Bhor Industries P. Ltd. (2006) 284 ITR 319, arguing that travelling expenses of directors' wives are admissible only if for business purposes.

Which sections of the Income-tax Act were involved?

Section 260A,Section 40A(5)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: 02.02.2015 I.T.A.No.54 of 1999 Commissioner of Income Tax (Central), Ludhiana ...Appellant Versus M/s Hero Cycles Ltd., Ludhiana

...Respondent CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA

HON'BLE MR. JUSTICE HARI PAL VERMA

1.

Whether Reporters of local papers may be allowed to see the judgment?

2.

To be referred to the Reporters or not?

3.

Whether the judgment should be reported in the Digest? Present : Ms. Savita Saxena, Advocate, for the appellant.

Mr. Aalok Mittal, Advocate, for the respondent. HEMANT GUPTA, J. (ORAL)

The Revenue is in appeal under Section 260 A of the Income Tax Act, 1961 (for short ‘the Act’) aggrieved against the order passed by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short ‘the Tribunal’) on 12.05.1998 relating to the assessment year 1988-89. The Revenue - appellant has raised the following substantial questions of law: (1) Whether on the facts and in the circumstances of the case, the ITAT was right in holding that Disallowance of Medical expenses

The order continues below.

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