1989 (1) TMI 162 - AT - Income Tax

Issues Involved:
1. Treatment of medical reimbursement and insurance as perquisites under Section 40(c) of the IT Act, 1961.
2. Withdrawal of relief under Section 35B for various expenditures.

Issue-wise Detailed Analysis:

1. Treatment of Medical Reimbursement and Insurance as Perquisites:
The second ground of appeal concerns the treatment of two amounts, Rs. 5086 and Rs. 1350, towards medical reimbursement and insurance as perquisites for purposes of disallowance under Section 40(c) of the IT Act, 1961. The assessee's counsel argued that reimbursement of medical expenses and insurance premiums should not be considered perquisites for Section 40(c) purposes, referencing the Delhi High Court judgments in CIT vs. Bharat Ram Charat Ram P. Ltd. and Instalment Supply Pvt. Ltd. Additionally, the CBDT Circular No. 376, dated 6th January 1984, was cited, which states that medical expense reimbursement exceeding Rs. 5,000 per annum is taxable. The learned Departmental Representative supported the lower authorities' orders. The Tribunal concluded that the assessee should succeed based on the Delhi High Court judgments, thus reversing the lower authorities' order on this account.

2. Withdrawal of Relief under Section 35B:
The third and fourth grounds of appeal pertain to the withdrawal of relief under Section 35B for various expenditures. The assessee claimed weighted deduction under Section 35B on expenditures totaling Rs. 9,98,938. The ITO allowed weighted deduction on certain items in full while allowing only 50% on others and disallowing the rest. The CIT(A) not only confirmed the ITO's partial disallowance but also withdrew deductions already allowed by the ITO.

Detailed Analysis of Specific Expenditures:

- Commission to Indian Agents:
The Special Bench of the Tribunal in J. Hem Chand and Co. and the Delhi Bench 'D' of the Tribunal for the assessment year 1974-75 had allowed such claims. Respectfully following these judgments, the Tribunal directed that weighted deduction should be allowed on commission to Indian agents for Rs. 11,976, reversing the CIT(A)'s order.

- Salary of Staff Engaged in Export Department:
The Tribunal noted that this issue was covered by the judgment of the Special Bench in J. Hem Chand and Co. and allowed by the Delhi Bench 'D' for the assessment year 1974-75. The Tribunal held that the CIT(A) was not justified in withdrawing the relief of Rs. 58,335 allowed by the ITO on 50% of the expenditure claimed. The enhancement made by the CIT(A) was vacated, but the remaining 50% disallowance was upheld.

- Freight and Forwarding Charges and Insurance Charges:
The Tribunal acknowledged that the Special Bench in J. Hem Chand and Co. had decided against the assessee on these issues, thus no interference in the CIT(A)'s order was warranted.

- Export Credit and Guarantee:
The Tribunal reversed the lower authorities' decision, allowing the expenditure of Rs. 1,339 based on the Special Bench's favorable ruling in J. Hem Chand and Co.

- Commission to Foreign Agents:
Following the Tribunal's earlier decision for the assessment year 1974-75, the Tribunal reversed the CIT(A)'s order and restored the ITO's allowance of Rs. 27,427.

- Telephone Charges:
The Tribunal allowed a 50% weighted deduction on telephone charges, modifying the lower authorities' orders based on the judgments in SOT 150 (SB) and Gedore Tools (India) (P) Ltd.

- Stationery and Conveyance:
The Tribunal directed the ITO to allow a 50% weighted deduction on these expenses, modifying the lower authorities' orders as per the Special Bench's order in (1982) 1 SOT 150 (Bom) (SB).

- Hospitality to Foreign Delegates:
The Tribunal allowed a 100% weighted deduction under Section 35B, following its earlier decisions for the assessment years 1976-77 and 1977-78.

- Foreign Delegation Expenses:
The Tribunal allowed the claim based on previous favorable rulings in similar cases.

- Rent of Export Division:
The Tribunal considered 50% of the export division's expenses for weighted deduction as reasonable and reversed the CIT(A)'s withdrawal of Rs. 6,881.

Conclusion:
The appeal was partly allowed, with the Tribunal providing relief on several counts while upholding the disallowance on others based on established legal precedents and specific judgments.

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