Binding precedent governed superannuation fund deduction and employee-director remuneration disallowance in favour of the assessee.

Binding precedent governed both tax questions discussed. The article notes that 100% deduction of the initial contribution to a superannuation fund was allowed notwithstanding the CBDT notification, because an earlier Bombay High Court decision had already settled the point in favour of the assessee. It also notes that remuneration and perquisites paid to employee-directors were to be disallowed under section 40(c), not section 40A(5), as earlier High Court and Supreme Court decisions had resolved that issue. Both questions were therefore treated as concluded in favour of the assessee.

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Issues: (i) Whether the assessee was entitled to deduction of 100 per cent of the initial contribution to the superannuation fund notwithstanding the notification issued by the Central Board of Direct Taxes. (ii) Whether disallowance of remuneration and perquisites paid to employee directors was to be worked out under section 40(c) instead of section 40A(5) of the Income-tax Act, 1961.

Issue (i): Whether the assessee was entitled to deduction of 100 per cent of the initial contribution to the superannuation fund notwithstanding the notification issued by the Central Board of Direct Taxes.

Analysis: The controversy on this issue had already been concluded by an earlier decision of the Court in favour of the assessee, and that precedent was treated as governing the reference.

Conclusion: The issue was answered in the affirmative and in favour of the assessee.

Issue (ii): Whether disallowance of remuneration and perquisites paid to employee directors was to be worked out under section 40(c) instead of section 40A(5) of the Income-tax Act, 1961.

Analysis: The controversy on this issue also stood concluded by earlier decisions of the Court and the Supreme Court, and the same approach was followed in the present reference.

Conclusion: The issue was answered in the affirmative and in favour of the assessee.

Final Conclusion: Both referred questions were decided in favour of the assessee, and the reference stood disposed of accordingly.

Ratio Decidendi: Where the controlling legal position is settled by binding precedent, the reference must be answered consistently with that precedent on the same questions of law.

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