Income-tax reference principles: section 40(c) and rule 6D questions were partly referred, while rule 6D excluded a non-employee technician.

Section 256(2) reference principles were applied to three income-tax questions: the characterisation of premium paid for a managing director's personal accident insurance policy under section 40(c), and the computation of disallowance under rule 6D by reference to yearly journeys rather than individual trips; both were treated as fit questions of law to be stated. The Court further held that rule 6D did not apply to a foreign technician who was not an employee of the assessee, and that this question did not arise from the Tribunal's order. The reference application was therefore allowed only in part.

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Issues: (i) Whether the premium paid for a managing director's personal accident insurance policy could be treated as a perquisite within the meaning of section 40(c) of the Income-tax Act, 1961, so as to require a reference of the question of law. (ii) Whether disallowance under rule 6D was to be computed with reference to the total journeys undertaken in a year rather than each journey taken by an employee or director on a day-to-day basis. (iii) Whether rule 6D applied to a foreign technician who was not an employee of the assessee.

Issue (i): Whether the premium paid for a managing director's personal accident insurance policy could be treated as a perquisite within the meaning of section 40(c) of the Income-tax Act, 1961, so as to require a reference of the question of law.

Analysis: The question involved a legal issue on the characterisation of the insurance premium under section 40(c). The Court found it appropriate that the Tribunal should state this question for consideration under section 256(2).

Conclusion: The question was directed to be stated in favour of the Revenue.

Issue (ii): Whether disallowance under rule 6D was to be computed with reference to the total journeys undertaken in a year rather than each journey taken by an employee or director on a day-to-day basis.

Analysis: The Court treated this question as covered by an earlier decision and accepted the same approach for the present reference application. The issue was therefore considered fit to be referred.

Conclusion: The question was directed to be stated in favour of the Revenue.

Issue (iii): Whether rule 6D applied to a foreign technician who was not an employee of the assessee.

Analysis: The Court held that the question did not arise from the Tribunal's order and further affirmed that rule 6D did not apply where the foreign technician was not an employee of the assessee.

Conclusion: The question was not directed to be stated and the holding was against the Revenue on this point.

Final Conclusion: The reference application succeeded only in respect of two questions, while the remaining questions were refused, resulting in a partial allowance of the application.

Ratio Decidendi: In a reference application under section 256(2), only questions of law arising from the Tribunal's order and found fit for reference can be directed to be stated, and rule 6D does not extend to a foreign technician who is not an employee.

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