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Issues:
1. Addition of value of perquisites to the manager in excess of statutory limit. 2. Disallowance of perquisites to the Project Manager. 3. Deletion of guest house expenses. Analysis: Issue 1: The first ground of appeal involved the addition of Rs. 5,376 representing the value of perquisites allowed to the manager in excess of the statutory limit. The AO disallowed the excess perquisites as they exceeded 20% of the salary paid to the Managing Director. However, the CIT (A) deleted the addition, stating that the salary and perquisites did not exceed the limit of Rs. 72,000 as per IT Rules. The Tribunal upheld the CIT (A)'s decision, considering the company's sanctioned perquisites and the provisions of the IT Act. Issue 2: The second ground for appeal concerned the disallowance of perquisites to the Project Manager. The ITO disallowed perquisites exceeding 20% of the Project Manager's salary, but the CIT (A) found the disallowance excessive and restricted it. The Tribunal, referring to a Kerala High Court decision, held that certain allowances paid in cash were part of the salary, and no further disallowance was warranted. The cross-objection by the assessee was allowed, and the appeal by the Revenue was rejected. Issue 3: The third ground of appeal involved the deletion of Rs. 5,600 representing guest house expenses. The AO disallowed the expenses under s. 37(4) of the IT Act, but the CIT (A) deleted the addition, considering the business purpose of the guest house. The Tribunal noted the retrospective amendment to s. 37(5) and held that the expenses were not admissible post the amendment. However, the Tribunal allowed deduction for the period before the retrospective amendment, directing the assessing officer to compute and allow the expenses accordingly. In conclusion, the Tribunal partly allowed both the appeal and the cross-objection, maintaining decisions in line with relevant legal provisions and precedents cited during the proceedings.
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