1982 (8) TMI 88

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....g Director has been approved by the Central Government and there is, therefore, no scope for holding under s. 40(c) that any portion of the remuneration is excessive or unreasonable within the meaning of the section. It has been held by the Special Bench of the Tribunal in the case of ITO vs. Sapt Textile Products (India) Ltd. (ITA No. 1304/Bom/1979)that even if the remuneration passes the test of excessiveness and reasonableness, it will under s. 40(c) be limited ti Rs. 72,000. Respectfully following the same, this ground is decided against the assessee. Ground No. 1 in appeal No. 575/(Bom)/81 (Asst. yr. 1978-79): 3. This ground consists of two items. The first part realtes to the remuneration paid to Shri M.I. Patel in excess of Rs.....

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....ort of the contention, the ld. counsel relied upon the ruling of the Calcutta High Court in CIT vs. Britania Industries Co. Ltd. (1982) 135 ITR 35 (Cal). Dealing with a similar question relating to the expenses of the free car provided for the employees of a company, it was held that the value of the perquisite which will be determined under rule 3 of the IT Rules, 1962 in the case of the employees should alone be considered for disallowance in the case of the employer. As against this, it was contended by the ld. Deptl. Rep. that the disallowance under s. 40A(5) and the determination of the perquisite value u/r 3 work in different planes and that there is no anomaly in not adopting the same amounts for both the purposes. The contention of ....

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....igh Court, therefore, held that the two provisions operate on different planes. As pointed out, this was a converse case and also one failing under s. 40(c). But the ratio of the ruling fully applies to the present case. In this connection, we may also refer to page 524 of Kanga & Palkhivala's Law and Practice of Income Tax (Seventh Edition). Dealing with the scope of s. 40A(5) it is stated"....for the purpose of disallowance under this sub-section what is taken into account is the actual expenditure incurred on providing the perquisite which will be different from and would be higher in several cases, than the value of the perquisite defined in s. 17(2) and computed under the IT Rules, 1962 for the purpose of inclusion in the employee's to....