2001 (8) TMI 83 - HC - Income Tax

Summary

Issues:
1. Reimbursement of medical benefit and house rent allowance disallowance under section 40(c) of the Income-tax Act, 1961.
2. Cash payment of special duty allowance disallowance under section 40A(5) of the Income-tax Act, 1961.
3. Deduction under section 80VV of the Income-tax Act, 1961.

Issue 1: Reimbursement of Medical Benefit and House Rent Allowance Disallowance

The court referred to previous decisions to address the questions raised. Regarding medical benefit reimbursement, the court cited precedents where the controversy was settled against the assessee. The court referenced cases like Gujarat Steel Tubes Ltd. v. CIT and CIT v. Ambica Mills Ltd. to support the decision in favor of the Revenue. However, concerning the house rent allowance, the court relied on the decision in CIT v. Mafatlal Gangabhai and Co. P. Ltd. The court explained that cash payments by an assessee to employees do not fall under certain provisions of the Income-tax Act, as clarified by the apex court. Therefore, the payment of house rent allowance to the managing director in cash could not be considered for disallowance under section 40(c) of the Act.

Issue 2: Cash Payment of Special Duty Allowance Disallowance

The court addressed the question of cash payment of special duty allowance to employees under section 40A(5) of the Act. Referring to the principle established in CIT v. Mafatlal Gangabhai and Co. P. Ltd., the court concluded that such cash payments cannot be considered for disallowance. Consequently, the court answered this question in favor of the assessee and against the Revenue.

Issue 3: Deduction under Section 80VV

Regarding the deduction under section 80VV of the Income-tax Act, the court upheld the Tribunal's decision. The court agreed with the Commissioner of Income-tax (Appeals) that the expenditure related to legal proceedings in connection with tax liability should be allowed from the balance of the income of the assessee. Consequently, the court ruled in favor of the assessee and against the Revenue on this issue as well.

In conclusion, the court ruled in favor of the assessee on the questions related to house rent allowance, cash payment of special duty allowance, and deduction under section 80VV. However, the court ruled against the assessee on the issue of reimbursement of medical benefit. The reference was disposed of with no order as to costs.