1998 (4) TMI 117 - HC - Income Tax

Summary

Issues:
1. Application of section 43B to unpaid sales tax amount.
2. Treatment of personal accident insurance premium as a perquisite.

Analysis:

Issue 1: Application of section 43B to unpaid sales tax amount
The case involved a dispute regarding the applicability of section 43B of the Income-tax Act, 1961 to an unpaid sales tax amount of Rs. 9,68,948. The Income-tax Officer disallowed the amount since it was paid in the subsequent financial year, citing section 43B. However, the Tribunal ruled in favor of the assessee, stating that the payment was made before the due date. The High Court referred to the Supreme Court's decision in Allied Motors (P.) Ltd. v. CIT, which held that the first proviso to section 43B was retrospective. The court further referred to CIT v. Chandulal Venichand, where it was established that the liability would be allowable as a deduction if paid before the due date for filing the return of income. Thus, the High Court held that section 43B did not apply in this case, and the assessee's claim was accepted.

Issue 2: Treatment of personal accident insurance premium as a perquisite
The second issue revolved around the treatment of a personal accident insurance premium paid by the company for its director. The Tribunal considered whether the premium constituted a benefit to the director under section 40(c). The absence of a traceable insurance policy raised questions about the nature of the policy and the party responsible for paying the premium. Drawing on the decision of the Delhi High Court in CIT v. Lala Shri Dhar, the Tribunal concluded that if the company took out the policy to insure itself against liability towards the director, it did not amount to a benefit for the director. As the director did not voluntarily take out the policy or bear the obligation to pay the premium, the Tribunal held that the premium was not a perquisite for the director. The High Court affirmed this decision, stating that there was no error of law in the Tribunal's ruling. Therefore, the second question was answered in favor of the assessee.

In conclusion, the High Court resolved both issues in favor of the assessee, emphasizing the retrospective application of section 43B and the absence of a benefit to the director in the case of the personal accident insurance premium.