1998 (4) TMI 6 - HC - Income Tax

Summary

Issues:
1. Interpretation of expenses as perquisites under sections 40(c) and 40A(5) of the Income-tax Act, 1961.
2. Eligibility of deposit with the Industrial Development Bank of India for surcharge reduction under the Finance (No. 2) Act, 1977.

Analysis:

Issue 1: Interpretation of expenses as perquisites under sections 40(c) and 40A(5) of the Income-tax Act, 1961:
The primary question revolved around whether certain expenses incurred by the assessee could be considered as perquisites under sections 40(c) and 40A(5) of the Income-tax Act, 1961. The court examined various items of expenditure, including rates and taxes paid on buildings and vehicles, salary paid to a watchman, maintenance of vehicles, depreciation thereon, and personal accident insurance premium payments.
- Regarding rates and taxes paid on buildings and vehicles, the court held that these expenses do not qualify as perquisites under the mentioned sections as they are incurred in the capacity of the owner, not the employer.
- The salary paid to a watchman was deemed a perquisite by the court, contrary to the Tribunal's decision, based on previous legal interpretations.
- Maintenance of vehicles and depreciation thereon were also considered perquisites under the Act, following Supreme Court precedent.
- Finally, the court concluded that personal accident insurance premium payments were not perquisites as the policy was for the employer's benefit, not the employees, aligning with previous judgments.

Issue 2: Eligibility of deposit with the Industrial Development Bank of India for surcharge reduction under the Finance (No. 2) Act, 1977:
The second issue involved the deduction of a deposit made by the assessee with the Industrial Development Bank of India under the Companies Deposits (Surcharge on Income-tax) Scheme, 1976. The Income-tax Officer initially disallowed the claim, stating it was not paid before the due date for the payment of advance tax. However, the Commissioner of Income-tax and the Income-tax Appellate Tribunal ruled in favor of the assessee. The court upheld this decision, emphasizing that the deposit met the statutory conditions under the Finance (No. 2) Act, 1977, and thus, the assessee was entitled to a reduction in surcharge as per the proviso to the Act.

In conclusion, the court answered the first question by specifying which expenses could be considered perquisites under sections 40(c) and 40A(5) of the Income-tax Act while affirming the eligibility of the deposit made with the Industrial Development Bank of India for surcharge reduction under the Finance (No. 2) Act, 1977.