2008 (9) TMI 315 - HC - Income Tax

Various Issues - Cash Payment towards the medical expenses by way of payment of premium towards group medical insurance scheme and reimbursement of medical expenses, electricity, water and gas charges shall not be treated as perquisite while computing disallowance under section 40(c)/40A(5) But the provisions of section 40A(5)(C) applicable to salary and perquisite paid to employees - roads constructed within the factory premises does not constituted plant and does not qualified for the grant of investment allowance under section 32A Surtax is not deductible while arriving at the taxable income freight expenses, octroi duty, bank charges, trunk call charges, insurance charges are not eligible for weighted deduction u/s 35B

Summary

Issues:
1. Treatment of medical expenses and perquisites under section 40(c)/40A(5) of the Income-tax Act, 1961.
2. Allowance of deduction for surtax payable under the Companies (Profits) Surtax Act, 1964.
3. Claim of investment allowance under section 32A for roads constructed within the factory premises.

Analysis:

1. Treatment of Medical Expenses and Perquisites:
The Income-tax Appellate Tribunal referred questions regarding the treatment of medical expenses and perquisites under section 40(c)/40A(5) of the Income-tax Act for the assessment years 1978-79 and 1979-80. The Tribunal held that the medical expenses, including premium for group medical insurance and reimbursement of various charges, should not be considered as perquisites for computing disallowance under the mentioned sections. The Commissioner of Income-tax (Appeals) and the Tribunal supported the assessee's claim. The judgment cited relevant cases like CIT v. Mafatlal Gangabhai and Co. and HMM Ltd. v. CIT to establish that certain expenses were not covered under the sections in question. The court upheld the Tribunal's decision in favor of the assessee.

2. Deduction for Surtax Payable:
The assessee contested the disallowance of deduction for surtax payable under the Companies (Profits) Surtax Act, 1964, in arriving at the taxable income. The Tribunal ruled against the assessee, citing precedents like Smith Kline and French (India) Ltd. v. CIT, which determined that the assessee was not entitled to such deductions. The court upheld the decision against the assessee and in favor of the Revenue.

3. Claim of Investment Allowance under Section 32A:
Regarding the claim for investment allowance under section 32A for roads constructed within the factory premises, the Assessing Officer disallowed the claim, but the Commissioner of Income-tax (Appeals) and the Tribunal allowed it. The court considered the definition of "plant" under section 32A and relevant judgments like CIT v. Gwalior Rayon Silk Manufacturing Co. Ltd. and CIT v. N. C. Budharaja and Co. to determine that roads did not qualify as plant for investment allowance. Therefore, the court ruled in favor of the Revenue against the assessee on this issue.

Overall, the High Court's judgment addressed the various issues raised by the Income-tax Appellate Tribunal, providing detailed reasoning and legal interpretations to resolve each matter in accordance with the Income-tax Act, 1961 and relevant judicial precedents.