2001 (2) TMI 31 - HC - Income Tax

Summary

Issues:
1. Medical benefits and house rent allowance for managing directors under section 40(c) of the Act
2. House rent allowance for company employees under section 40A(5) of the Act
3. Grouping of tours and application of limits under rule 6D

Issue 1: Medical Benefits and House Rent Allowance for Managing Directors
The court referred to previous decisions regarding the reimbursement of medical expenses to directors, stating that such reimbursements fall under section 40(c)(i) of the Act. The court cited Gujarat Steel Tubes Ltd. v. CIT and Ambica Mills Ltd. v. CIT to support the view that reimbursement of medical benefits should be considered for computing the disallowance under section 40(c) of the Act. The court held in favor of the Revenue regarding the allowability of house rent allowance paid to managing directors under section 40(c) of the Act based on the decision in Ambica Mills Ltd. v. CIT.

Issue 2: House Rent Allowance for Company Employees
The court relied on a previous decision in Income-tax Reference No. 27 of 1984 to determine that house rent allowance paid to employees of the company should be considered for computing the disallowance under section 40A(5) of the Act. The court concluded that house rent allowance for employees falls under the purview of section 40A(5) based on the cited judgment.

Issue 3: Grouping of Tours and Application of Limits under Rule 6D
Regarding the grouping of tours and application of limits under rule 6D, the court referred to decisions by the Andhra Pradesh and Punjab and Haryana High Courts. The court held that the limits under rule 6D should be applied with reference to each trip of an individual employee, not grouped together. The court agreed with the interpretation of rule 6D by the Andhra Pradesh and Punjab and Haryana High Courts, emphasizing that the expenditure should be considered for each trip of an individual employee.

In conclusion, the court answered the questions as follows:
- Question 1: In favor of the Revenue and against the assessee
- Question 2: In favor of the Revenue
- Question 3: In favor of the Revenue and against the assessee
The court held that the limits under rule 6D must be applied with reference to each trip of an individual employee. The reference was disposed of with no order as to costs.