1995 (9) TMI 47 - HC - Income Tax

Business Expenditure, Law Applicable To Assessment, Medical Expenses, Provident Fund, Sales Tax

Summary

Issues:
1. Interpretation of provisions regarding remuneration to managing directors.
2. Inclusion of medical reimbursement in maximum limit under section 40(c).
3. Applicability of section 43B to unpaid sales tax liability.
4. Treatment of sales tax collections as trading receipts.
5. Treatment of Employees' State Insurance and Provident Fund liability.
6. Applicability of section 43B to sales tax collections.

Analysis:

1. The first issue involves the interpretation of provisions regarding remuneration paid to managing directors who are also treated as employees. The Tribunal directed the application of section 40(c) instead of section 40A(5) for computing the income of the company. The court referred to a Supreme Court decision and concluded that both provisions would apply to directors who are also employees, and the higher ceiling should be applied. The question was answered in favor of the assessee.

2. The second issue pertains to the inclusion of medical reimbursement in the maximum limit under section 40(c). Citing a previous case, the court held that reimbursement of medical expenses incurred by directors is a benefit within the meaning of section 40(c)(i). The question was decided in favor of the Revenue and against the assessee.

3. The third issue addresses the applicability of section 43B to unpaid sales tax liability. The Tribunal found that if the sales tax liability was deposited within the statutory limit and before the due date for filing returns, section 43B would not be applicable. The court referred to a proviso inserted by the Finance Act, 1987, and a previous decision, holding that payments made within the specified time limit would not trigger section 43B. Questions 3 and 5 were answered in favor of the assessee.

4. The fourth issue concerns the treatment of sales tax collections as trading receipts. However, due to the affirmative answer to question 3, question 4 was deemed not necessary for a decision.

5. The fifth issue involves the treatment of Employees' State Insurance and Provident Fund liability. Similar to the treatment of sales tax liability, the court held that if the contributions were paid within the specified time limit, section 43B would not apply. The question was answered in favor of the assessee.

6. The final issue, question 6, regarding the applicability of section 43B to sales tax collections, was deemed academic and not answered due to the resolution of question 3. The reference was disposed of with no order as to costs.