1998 (3) TMI 67

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..... for determining the nature of expenditure and the quantum of remuneration for the purpose of applying the limit of Rs. 72,000 contained in section 40(c) and the first proviso to section 40A(5) ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that for he purpose of determining the quantum of remuneration on which the limit is to be applied whether under section 40A(5) or under section 40(c) the remuneration or tax payable to the employee under section 10(6)(vii) or under section 10(6)(viia) should altogether be excluded or ignored by virtue of sub-clause (b) to the second proviso to section 40A(5) and only on the balance the limit should be applied ?" The short facts leading to the refe .....

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..... 40A(5) of the Act operate for the purpose of determining the ceiling limit and to determine the quantum of the allowable remuneration of the directors by way of salary. The Tribunal also held that the remuneration received by the two directors which is exempt under section 10(6)(viia) of the Act cannot be taken into account for the purpose of applying the limit under section 40(c) of the Act. The Tribunal also held that to the extent the remuneration or tax paid to the technicians is exempt under section 10(6)(vii) of the Act, that remuneration should not be taken into account for the purpose of determining the quantum on which the ceiling should be applied either under section 40A(5) or under section 40(c) of the Act. It is this order of .....

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..... applied even in the case of director-employees, but the ceiling provided under section 40A(5) is not applicable to the extent of remuneration that is exempt under section 10(6)(vii) or to the extent of the tax payable to the employees by the employer which is exempt under section 10(6)(vii) of the Act and to the extent to which it is exempt, the remuneration should be excluded altogether for the purpose of determining the ceiling under section 40A(5) of the Act. We, therefore, are of the opinion that the Tribunal was correct in accepting the case of the assessee. Accordingly, we answer both the questions of law referred to us in the affirmative and against the Revenue. The assessee is entitled to costs of Rs. 750. - - TaxTMI - .....

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