2001 (8) TMI 80 - HC - Income Tax

Summary

Issues:
Interpretation of rule 6D of the Income-tax Rules, 1962 regarding the disallowance of expenses incurred during travel and stay for an employee.

Analysis:
The case involved a dispute regarding the disallowance of Rs.1,12,810 under rule 6D of the Income-tax Rules, 1962 for the assessment year 1976-77. The assessee, a public limited company, argued that expenses incurred after an employee reached the destination should not be considered for disallowance under rule 6D. The Income-tax Officer proposed a disallowance of Rs.1,22,677, which was later restricted to Rs.1,12,810 by the Inspecting Assistant Commissioner. The Commissioner of Income-tax (Appeals) and the Tribunal upheld the disallowance, leading to the reference to the High Court for interpretation.

The relevant sections for the dispute were section 37(1), 37(3) of the Income-tax Act, 1961, and rule 6D of the Income-tax Rules, 1962. Section 37(1) allows expenditure for business purposes, while section 37(3) places conditions on expenditure related to travelling and accommodation. Rule 6D specifies limits on expenditure for travelling within and outside India. The rule covers expenses incurred by an employee both during actual travel and stay at any particular place for business purposes.

The High Court analyzed rule 6D(2) and observed that there is no provision to separate expenses into those related to travel and stay. The rule applies to the entire expenditure incurred by an employee during travel and stay away from headquarters for business purposes. The language used in the rule indicates that the limitation provided covers all expenses during the period of travel and stay. Therefore, the Court upheld the conclusions of the Tribunal regarding the applicability of rule 6D and answered the question in favor of the Revenue, against the assessee.

In conclusion, the High Court affirmed the disallowance of Rs.1,12,810 under rule 6D for the assessment year 1976-77, emphasizing that the rule encompasses expenses incurred both during travel and stay for business purposes.