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Issues Involved: Interpretation of Income-tax Act provisions regarding deductions under sections 36(1)(viii) and 40A(5) and applicability of Board instructions.
Question 1: The issue was whether the Income-tax Appellate Tribunal was justified in not applying later instructions of the Board u/s 1275 in F. No. 204/72/75-11A. 11 dated 13-8-1970 for assessment made after receipt of such instructions. The Tribunal had relied on the Board's instructions in force during the relevant period. Question 2: The controversy was about the correct interpretation of section 36(1)(viii) of the Income-tax Act, 1961, regarding the timing of applying deductions. The Tribunal held that total income should be computed before giving any deduction under this section, while the Revenue argued for calculating total income after giving all deductions including this section. Question 3: The issue was whether cash allowances should be included for disallowance of perquisites u/s 40A(5) of the Income-tax Act, 1961. This question was answered in the affirmative following a previous decision of the court. Question 4: The question was whether certain allowances and payments exceeding 20% of salary and dearness allowance were disallowable u/s 40A(5) of the Income-tax Act. This issue was also answered in the affirmative based on a prior court decision. The judgment analyzed the provisions of section 36(1)(viii) and the definition of "total income" in section 2(45) of the Act. It discussed the conflicting interpretations regarding the calculation of deductions and emphasized the importance of following the relevant circulars issued by the Board. The court upheld the Tribunal's decision on the timing of deductions and the applicability of Board instructions. Additionally, questions 3 and 4 were resolved in favor of the assessee based on precedents set by previous court decisions. The reference was answered accordingly, and no costs were awarded in the case.
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