Director car-use perquisites remain deductible where treated as remuneration and not shown excessive or unreasonable.

Company cars provided to directors for personal use were treated as part of the remuneration and perquisite structure of the business, so the related expenditure was deductible. The absence of a contemporaneous board resolution or express authorisation during the accounting year did not, by itself, convert the outlay into non-business expenditure or justify disallowance as unauthorised spending. Disallowance under the statutory limit was not sustained because the department did not establish that the amount was excessive or unreasonable. The revenue's challenge to deletion of the addition therefore failed, and the deduction was upheld.

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Issues: Whether the amount representing directors' personal use of company cars was disallowable as unauthorised expenditure or as expenditure outside the scope of section 40(c) of the Income-tax Act, 1961.

Analysis: The directors' use of the company's cars was not disputed. The decisive question was whether the expenditure could be disallowed merely because there was no contemporaneous resolution or express contractual authorisation during the accounting year. The majority view treated the facility as part of the company's remuneration structure and held that the outgoing was incurred by the company in the course of its business. The absence of a resolution during the accounting year did not convert the expenditure into a non-business outlay. Since the department did not establish excessiveness or unreasonableness within section 40(c), and the payment was in substance an additional emolument/perquisite to the directors, the amount was considered deductible. The dissenting view treated the absence of authorisation as decisive and upheld the disallowance.

Conclusion: The amount was not disallowable on the ground that it was unauthorised, and the departmental appeal failed.

Final Conclusion: The deduction for the directors' use of company cars was sustained and the revenue's challenge to the deletion of the addition did not succeed.

Ratio Decidendi: An expenditure incurred by a company for providing cars to its directors, even for personal use, is deductible where it forms part of the remuneration/perquisite structure and is not shown to be excessive or unreasonable under the applicable statutory ceiling; absence of a contemporaneous authorising resolution does not by itself justify disallowance.

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