1999 (3) TMI 60 - HC - Income Tax

Court Decision: Assessee wins on salary exclusion, medical reimbursement, and investment allowance eligibility

The court ruled in favor of the assessee on the issues related to the exclusion of proportionate salary of employees for periods outside India and the ... Business Expenditure, Surtax, Investment Allowance Issues:1. Exclusion of proportionate salary of employees for period outside India from total salary under section 40A(5) of Income-tax Act, 1961.2. Treatment of medical reimbursement as part of salary for computation of disallowance under section 40A(5) of Income-tax Act, 1961.3. Deductibility of amount payable towards surtax in computing profits and gains of business.4. Eligibility of investment allowance for chemicals manufactured as heavy chemicals under Ninth Schedule to Income-tax Act, 1961.Issue 1:The first issue involved whether the proportionate salary of employees for the period of their stay outside India should be excluded from the total salary while computing disallowance under section 40A(5) of the Income-tax Act, 1961. The counsel agreed that this question was covered by a Supreme Court decision and should be answered in the negative and in favor of the assessee.Issue 2:The second issue revolved around whether medical reimbursement given to employees, not treated as perquisite, should be considered part of salary for computation of disallowance under section 40A(5) of the Income-tax Act, 1961. The counsel agreed that this question was covered by a previous court decision and should be answered in the negative and in favor of the assessee.Issue 3:The third issue was about the deductibility of the amount payable towards surtax in computing the profits and gains of the business. The counsel agreed that this question was covered by a Supreme Court decision and should be answered in the affirmative and in favor of the Revenue.Issue 4:The final issue was regarding the eligibility of investment allowance for chemicals manufactured by the assessee as heavy chemicals under the Ninth Schedule to the Income-tax Act, 1961. The court examined whether the chemicals produced qualified as heavy chemicals based on various dictionary definitions. The Tribunal concluded that the chemicals fell within the definition of heavy chemicals as per tonnage quantities, contrary to the Assessing Officer's interpretation. Consequently, the court answered the question in favor of the assessee and against the Revenue.In conclusion, the judgment addressed various legal issues under the Income-tax Act, 1961, providing detailed analyses and references to relevant legal precedents to arrive at decisions favorable to either the assessee or the Revenue based on the specific circumstances and legal interpretations involved in each issue.