2004 (2) TMI 12 - HC - Income Tax

Whether Tribunal is correct in law in holding that the provisions of section 40(c) and not section 40A(5) are applicable to the director employees and on that ground deleting the disallowance of perquisites provided by the assessee-company to its directors in excess of the limits permitted in section 40A(5)? Held that The employees concerned herein also happen to be directors. The provision in clause (c) of section 40 applies to directors among others. Of course section 40(c) is applicable only to companies whereas section 40A(5) is applicable to employees whether of companies or others. In the case of directors who are also employees both the provisions will be attracted-the higher of the two ceilings has to be applied. - Accordingly the references are disposed of in favour of the assessee

Summary

The High Court of Delhi ruled in favor of the assessee, stating that for directors who are also employees, both section 40(c) and section 40A(5) apply, and the higher ceiling under section 40(c) should be used. The judgment is based on a Supreme Court decision in CIT v. Indian Engineering and Commercial Corporation P. Ltd. [1993] 201 ITR 723.