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TMI Blog1993 (7) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... er the provision of the Income-tax Act, 1961? 3.Whether, on the facts and in the circumstances of the case, Tribunal erred in holding that the excess payment of ₹ 7,753 made on account of fluctuations in the exchange rate of dollars, at the time of repayment of the dollar loan, raised from ICICI for purchasing machinery from abroad, was a capital expenditure and not an allowable revenue expenditure ? 4.Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the commission paid to the wholetime directors is covered by the term 'remuneration' as envisaged in section 40(c) of the Act? 5.Whether, on facts and in the circumstances of the case, the Tribunal erred in holding that the expenditure incurred during the stay of the employees or other persons outside the headquarters for the purpose of the business of the assessee is expenditure on travelling subject to the provisions of section 37(3), read with rule 6D, of the Income-tax Rules, 1962 ? It is not in dispute that some of these questions are concluded by the decisions of this Court and, accordingly, it is not necessary to set out in detail the facts and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n expensive one. It particularly includes 'profit in lieu of salary'. But 'profit in lieu of salary' is also defined in an inclusive manner in its definition under section 17(3)(ii ) of the Act. It can include any payment received by an assessee from an employer including the payment received by an employee on termination of service with certain exceptions as specially referred to in the definition. Now in common parlance, salary is normally meant to be a payment by the employer to the employee arising from the employment relation and the rate of payment is commonly understood to be periodic and at a weekly or monthly or annual rate. That way, the medical reimbursement may not perhaps be strictly understood as salary in its popular connotation. It is exactly for the purpose of roping in other non-recurring or non-periodic payments by the employer to the employee strictly arising from their jural relation of employer and employee that the special addition has been made to the definition by including in the meaning of salary, the expression 'profit in lieu of salary'. Such non-periodic cash payments would be embraced by the expression 'profit in lieu of sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance referred to in rule 6D and does not extend to any other expenditure incurred provided the expenditure is wholly and exclusively laid out for the purpose of the business. It has not been the revenue's case that the expenditure disallowed was not incidental to the business or was of a personal nature. That being so, the same principle laid down by this Court in the aforesaid case shall apply and the question is, therefore, answered in the affirmative and in favour of the assessee. 8. As for the facts relating to the fourth question, i.e., the question of the disallowance of commission, the Tribunal merely stated that the ITO did not accept the assessee's claim that the 'commission' paid to its wholetime director was not covered by the term 'remuneration' for the purpose of section 40(c). The ITO included the said commission in the remuneration for determining the disallowance under section 40(c). The Commissioner (Appeals), however, accepted the claim of the assessee and directed the ITO to recompute the disallowance under section 40(c) without including therein the commission as part of remuneration. On an appeal by the department, the Tribunal, relyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . v. CIT [1990] 183 ITR 120 , has consistently taken this view that commission is not to be equated with remuneration. 10. We cannot, however, visualise such a clear-cut separation between remuneration and commission. It largely depends on the relation wherefrom entitlement to the commission arises. Where the 'commission' becomes due for the reason that the payee though a director or a person substantially interested in the payer-company, undertook a contractual liability, the commission paid to him may be treated distinctly from common remuneration. Such was the situation in CIT v. Sudarsan Chits (India) Ltd. [1990] 182 ITR 94 (Ker.). There the amount paid by the assessee-subsidiary company to the holding-company under an agreement for the use of services of officers of the holding-company including the managing director was held to be a payment not attracting the provisions of section 40(c), because the payment in question was made on contractual basis and it was incurred on account of the business expediency. Moreover, the payment under the contract was not found nor challenged as colourable or otherwise suspect. 11. There is one decision of this Court, viz., India ..... 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