2001 (5) TMI 41

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....ction 40A(5) of the Act read with section 10(5) and rule 2B of the Income-tax Rules ?" The assessee-company has filed the return on June 27, 1990, disclosing net profit of Rs. 5,89,45,220. During the course of assessments the Assessing Officer noticed that the company has paid travelling allowances in contravention of rule 2B of the Income-tax Rules, 1962. Therefore, the amount of Rs. 8,873 has been disallowed in the hands of the employee. The Assessing Officer has taken the view, when the amount of Rs. 8,873 is not exempted under section 10(5) of the Act of 1961, this amount should not be excluded fort disallowance under section 40A(5) of the Act of 1961, in the hands of the assessee-company also. In appeal before the Commissioner of In....

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....ion 10(5) of the Act is taxable. In other words if any concession is given more than the limits provided in rule 2B that is not exempted in clause (5) of section 10 of the Act and when that is not exempted in the hands of the individual employee, how that should be excluded for the purpose of disallowance under section 40A(5) of the Act ? Learned counsel for the assessee, Dr. Pal, submits that section 40A(5) refers to leave travel concession and not the limit prescribed on that under rule 2B of the Rules, 1962. The second proviso to section 40A(5) reads as under : "Provided further that in computing the expenditure referred to in sub-clause (i) or the expenditure or allowance referred to in sub-clause (ii) of this clause or the agg....