Perquisite classification under income tax law: premium paid for an employee-director's assurance required reference as a legal question.

Premiums paid by an assessee on behalf of an employee-director required examination under section 40A(5) and section 40(c) of the Income-tax Act, 1961, because Explanation 2(b) treats as a perquisite any payment made, otherwise than to a recognised provident fund or approved superannuation fund, to secure life assurance or an annuity for an employee. On that statutory scheme, the character of the premia as salary or a disallowable perquisite raised a referable question of law. The Tribunal was therefore directed to refer the question to the High Court.

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Issues: Whether a question of law arose for reference on the treatment of premia paid by the assessee on behalf of an employee-director as salary or perquisite for the purposes of disallowance under section 40A(5) or section 40(c) of the Income-tax Act, 1961.

Analysis: The assessment years concerned were 1979-80 to 1981-82. The statutory scheme of section 40A(5) and Explanation 2(b) treats as a perquisite any payment by an assessee, otherwise than to a recognised provident fund or approved superannuation fund, to effect an assurance on the life of an employee or to effect a contract for an annuity. In that setting, the question whether the premia fell within salary or constituted a disallowable perquisite required consideration by the High Court.

Conclusion: A referable question of law arose, and the Tribunal was directed to refer the question to the High Court.

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