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Issues Involved:
1. Entitlement to higher investment allowance despite not furnishing the required certificate along with the return of income as per Section 32A(2B)(ii) of the Income-tax Act, 1961. 2. Computation of disallowance in respect of expenditure on remuneration and perquisites to the employee-director under Section 40(c) versus Section 40A(5) of the Income-tax Act, 1961. Issue-wise Detailed Analysis: Issue 1: Entitlement to Higher Investment Allowance The core issue was whether the assessee was entitled to a higher investment allowance under Section 32A(2B)(ii) of the Income-tax Act, 1961, despite not submitting the required certificate from the prescribed authority along with the return of income. The Tribunal had ruled in favor of the assessee, noting that the assessee had applied for the certificate in time and submitted it to the Income-tax Officer during the assessment proceedings. The Revenue contested this decision, arguing that the mandatory condition of furnishing the certificate along with the return was not met. The court examined whether the requirement of submitting the certificate "along with the return of income" was mandatory or directory. The court referred to its earlier decision in CIT v. Shivanand Electronics [1994] 209 ITR 63, which dealt with a similar requirement under Section 80J(6A) of the Act. In that case, the court had held that while the submission of the audit report was mandatory, the requirement to submit it "along with the return" was directory. The court applied the same reasoning to Section 32A(2B)(ii), concluding that the requirement to submit the certificate along with the return was directory. Therefore, if the certificate was submitted before the completion of the assessment and the delay was satisfactorily explained, the Income-tax Officer could accept it. The court affirmed the Tribunal's decision, holding that the Tribunal was justified in directing the Income-tax Officer to consider the assessee's claim for a higher investment allowance based on the certificate submitted during the assessment proceedings. Thus, Question No. 1 was answered in the affirmative, in favor of the assessee and against the Revenue. Issue 2: Computation of Disallowance for Employee-Director's Remuneration and Perquisites The second issue was whether the disallowance in respect of expenditure on remuneration and perquisites to the employee-director should be computed under Section 40(c) or Section 40A(5) of the Income-tax Act, 1961. Both parties agreed that this issue had been conclusively settled by the Supreme Court in CIT v. Continental Construction Ltd. [1998] 230 ITR 485 and by the Bombay High Court in CIT v. Hico Products Pvt. Ltd. (No. 1) [1993] 201 ITR 567, which ruled in favor of the assessee. Consequently, Question No. 2 was answered in the affirmative, in favor of the assessee and against the Revenue. Conclusion: The court concluded that the Tribunal's decision to allow the higher investment allowance despite the delayed submission of the required certificate was correct, as the requirement to furnish the certificate along with the return was directory. Additionally, the computation of disallowance for the employee-director's remuneration and perquisites was to be done under Section 40(c), not Section 40A(5), as established by precedent. Both questions were answered in favor of the assessee and against the Revenue, and the reference was disposed of with no order as to costs.
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