1992 (6) TMI 2 - HC - Income Tax

Summary

Issues:
1. Treatment of medical expenses reimbursed as perquisite under u/s 40(c) of the Income-tax Act, 1961.
2. Disallowance of travelling expenses for exploring business expansion possibilities.
3. Addition of export subsidy and duty drawback not accounted for in the accounts.

Issue 1:
The High Court held that medical expenses reimbursed should not be treated as perquisite for disallowance u/s 40(c) of the Income-tax Act, 1961, based on a previous decision in CIT v. Ashoka Marketing Ltd. [1990] 181 ITR 493.

Issue 2:
Regarding the disallowance of travelling expenses for exploring business expansion, the Court considered the case of the assessee, a plywood manufacturer, exploring the possibility of setting up a new factory in Kenya. The Court distinguished this case from Indian Oxygen Ltd. v. CIT [1987] 164 ITR 466, emphasizing that the expenses were directly related to expanding the existing business, making them allowable revenue deductions. The Court also referenced CIT v. Alembic Glass Industries Ltd. [1976] 103 ITR 715, where setting up a new unit for the same product at a different place was considered an integral part of the existing business.

Issue 3:
In relation to the addition of export subsidy and duty drawback not accounted for in the accounts, the Court noted that the assessee consistently accounted for and offered these for taxation on a cash basis. As the assessee followed the cash method of accounting for these items, the Court ruled in favor of the assessee.

The judgment was delivered by AJIT KUMAR SENGUPTA, with SHYAMAL KUMAR SEN concurring.