COMMISSIONER OF INCOME TAX vs. ASHOKA MILLS LTD.,

ITR/283/1984HC GujaratGJHC24011948198407 April 1999Author: HONOURABLE MR. JUSTICE R.BALIA,HONOURABLE MR. JUSTICE ANIL R. DAVE3 pages
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What were the facts?

This case involves an Income Tax Reference No. 283 of 1984 before the High Court of Gujarat at Ahmedabad, initiated at the instance of the revenue. The Income-tax Appellate Tribunal, Ahmedabad Bench 'A', referred three questions of law for the Court's opinion under Section 256(1) of the Income-tax Act, 1961. The assessee is Ashoka Mills Ltd., and the petitioner is the Commissioner of Income Tax. The reference concerns assessment years not explicitly stated. The procedural history involves the Tribunal referring questions after its decision, with the revenue appearing through counsel and the assessee having been served but not appearing. The High Court is tasked with providing its opinion on the referred questions.

What did the High Court hold?

The High Court addressed each of the three referred questions. For Question 1, concerning reimbursement of medical expenses to Managing Directors, the Court, following its own decision in Gujarat Steel Tubes v. CIT (210 ITR 358), held that such reimbursement is to be treated as remuneration or benefit to the director within the meaning of Section 40(c)(i). Therefore, the question was answered in the negative, against the assessee and in favour of the revenue. For Question 2, regarding the payment of premium for personal accident insurance of the Managing Director, the Court relied on its decision in Ambica Mills Ltd. v. CIT (231 ITR 583), holding that such premium payment should be treated as part of remuneration for disallowance computation under Section 40(c). This question was also answered in the negative, favouring the revenue. For Question 3, concerning the cash payment of house rent allowance to employees under Section 40A(5), the Court, in agreement with the Bombay High Court's view in Commissioner of Income-tax v. Vickers Sperry of India Ltd. (216 ITR 861), held that such expenditure cannot be disallowed. This question was answered in the affirmative, in favour of the assessee and against the revenue. The reference was disposed of accordingly.

What were the issues?

The Tribunal had to decide three questions of law concerning the disallowance of certain expenses under the Income-tax Act, 1961: 1. Whether, on the facts and in the circumstances of the case, the reimbursement of medical expenses to Managing Directors could not be considered as a disallowance for the purpose of computation under Section 40(c) of the I.T. Act, 1961. 2. Whether the Appellate Tribunal was right in law in holding that for the purposes of Section 40(c), the payment of premium for personal accident insurance of the Managing Director could not be treated as a disallowance while computing the same under Section 40(c) of the I.T. Act, 1961. 3. Whether the Appellate Tribunal was right in law in holding that for the purpose of Section 40A(5), the amount of cash payment of house rent allowance amounting to Rs. 13,283/- paid to the employees did not form part of salary and was not includible for the purpose of determining the disallowance under the said section. The revenue argued that these expenses were disallowable under the respective sections. The assessee's arguments are not recorded as they did not appear. The revenue relied on precedents like Gujarat Steel Tubes v. CIT and Ambica Mills Ltd. v. CIT for questions 1 and 2, and Commissioner of Income-tax v. Vickers Sperry of India Ltd. for question 3.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 40(c),Section 40(c)(i),Section 40A(5)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 283 of 1984

For Approval and Signature:

Hon'ble MR.JUSTICE R.BALIA. and MR.JUSTICE A.R.DAVE ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements? Yes

2.

To be referred to the Reporter or not?

3.

Whether Their Lordships wish to see the fair copy of the judgement?

4.

Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge?

2

The order continues below.

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