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TMI Blog1998 (4) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 43 of 1961---for short "IT Act"). He made further disallowance under section 40A(5) of the Income-tax Act of a sum of Rs. 33,083. On appeal, the Commissioner of Income-tax (Appeals) rejected the claim of the assessee and confirmed the disallowance made by the Inspecting Assistant Commissioner. On further appeal by the assessee, the Tribunal held that the reimbursement of medical expenses and club expenses could not be treated as perquisites, but, none the less, being cash payments, they are in the nature of remuneration or salary or profits in lieu of salary and, therefore, these amounts should be taken into account for working out the ceiling limit for the purpose of disallowance under section 40(c) or section 40A(5) of the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nut-shell, section 40(c) is relatable to the director of a company, while section 40A(5) is relatable to an employee of the assessee-company. This apart, there is distinction of some significance between them. That is discernible by a cursory perusal of section 40(c)(i) and section 40A(5)(a)(i) and (ii) of the Income-tax Act. In section 40(c)(i), the expenditure incurred directly or indirectly is referable to the provision of any remuneration, benefit or amenity to a director, etc., whereas in section 40A(5)(a)(i) and (ii), the expenditure incurred directly or indirectly is referable not only to the payment of any salary to an employee, etc., but also the expenditure incurred directly or indirectly in making provision of any perquisite, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor and executives of the company as salary for the purpose of computing the admissible perquisites for applying the stipulated ceiling under section 40(c) of the Income-tax Act ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in treating cash payment made towards medical reimbursements of the employees of the company as salary for the purpose of computing the admissible perquisites for applying the stipulated ceiling under section 40A(5) of the Income-tax Act ?" The arguments of Mr. K. Vaitheeswaran, learned counsel representing Subbaraya Aiyar, Padmanabhan and Ramamani for the assessee and Mrs. Chitra Venkataraman, learned counsel appearing for the Revenue, were heard. We shall now enter into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We shall now make an endeavour to find out an answer to question No. (1). This question is relatable to expenditure incurred by the company on 7 two counts---one relating to payment of house rent allowance and the other relating to club subscription paid to the managing director of the assessee-company. No doubt true it is that the expenditure falling under section 40(c)(i) and (ii) shall in no case exceed the permissible limit prescribed in sub-clauses (A) and (B) thereto. Even the permissible limit of expenditure shall not be excessive or unreasonable in the opinion of the Income-tax Officer, having due regard to the legitimate needs of the company and the benefit derived by or accruing to it therefor. So far as the expenditure incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X
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