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TMI Blog1994 (2) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... ublication of the chairman's speech in newspapers and journals came within the ambit of section 37(3A) of the Income-tax Act? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the cost of calendars and gifts distributed by it was includible in working out the disallowance under section 37(3A) of the Income-tax Act?" Reference Application No. 494/(Cal) of 1987: At the instance of the Revenue: " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in directing the Income-tax Officer to exclude the items of expenditure pertaining to (i) premium paid to Calcutta Hospital and Nursing Home Benefit Association, and (ii) hospitalisation expenses borne by the assessee-company for the purpose of computation of disallowance under section 40A(5) of the Income-tax Act, 1961? 2. Whether, on facts and in the circumstances of the case, the Tribunal was correct in law in holding that the notional interest attributable to the interest-free loan cannot be held to be perquisite for the purpose of disallowance under section 40A(5) of the Income-tax Act, 1961?" This reference relates to the income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---- The Commissioner of Income-tax (Appeals) as well as the Tribunal upheld the disallowance in respect of the first two items of Rs. 1,12,016 and Rs. 2,53,591. The Tribunal held that by publication of the chairman's speech in the news papers, the assessee-company brought to the notice of the general public the performance of the company for a particular year highlighting the achievements made in different fields of its activities with a view to enhance its image and goodwill as well as to boost its sales in the subsequent years. As regards the cost of calendars and gifts amounting to Rs. 2,53,591, the Tribunal held that these calendars and gift articles were embossed with the name of the assessee-company as well as with the product manufactured and/or dealt with by it. These calendars and gifts were generally distributed amongst the assessee-company's customers and other traders through its distribution channel and, therefore, it could not be disputed that the expenses incurred for such purposes were covered by the expression "advertisement, publicity and sales promotion" as appearing in section 37(3B)(i) of the said Act. The Tribunal, therefore, upheld the disallowances of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his service contract. Furthermore, the word "perquisite" does not appear in section 40(c)(i) of the said Act and the restrictive phrase "whether convertible into cash or not" is also missing in the said clause. The words "remuneration or benefit or amenity" have a very wide meaning. In Blacks Law Dictionary, Revised fourth edition, the word "remuneration" has been defined to include "reward, recompense, salary". It has been further stated that if a man gives his services, whatever consideration he gets for giving his services is nothing but remuneration for him. The expression "benefit" has also been defined to mean "advantage, profit, fruit, privilege". In Webster's New Twentieth Century Dictionary, unabridged second edition, the word "remuneration" has been defined to mean "the act of paying of equivalent for services, loss or sacrifices; the equivalent given for services, loss or sufferings; that which remunerates; reward, pay; recompense, compensation". The word "remunerate" has been defined to mean "to reward; to recompense; to requit; to pay an equivalent for any service, loss, expense or other sacrifice". The word "benefit" has also been defined in the said dictionary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and fourth questions raised at the instance of the assessee are concerned with the expenditure incurred on publication of the chairman's speech in newspapers and journals as well as the cost of calendars and gifts to customers and other traders. There is no statutory requirement to publish a copy of the chairman's speech in newspapers and journals. The chairman's speech is delivered in the annual general meeting of a company which is attended by its shareholders only. The speech is required to be delivered in the annual general meeting notwithstanding the fact whether the same is separately published in the newspapers and journals or not. In fact, the whole purpose of publishing the chairman's speech in the newspaper is to bring to the notice of the general public the performance of the company in respect of the relevant year as well as to highlight the achievements made in the different fields of its activities. As rightly held by the Tribunal, the whole object is to enhance the image and goodwill of the company so as to boost its sales in the subsequent years. Similarly, the distribution of calendars as well as gift articles amongst the customers, dealers and traders clearly ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital and Nursing Home Benefit Association for the purpose of computation of the disallowance under section 40A(5) of the said Act. However, in respect of hospitalisation expenses of Rs. 27,641, we find that the decision of this court in Duncan Brothers and Co. Ltd.'s case [1983] 140 ITR 335 has no application. As indicated earlier, the meeting of hospitalisation expenses of the employees by the assessee-company is definitely covered by the expression "remuneration, benefit or amenity" as appearing in section 40(c)(i) of the Act. Coming to section 40A(5) of the Act, we find that the expression used therein is "salary" as defined in clause (i) read with clause (3) of section 17 with certain modifications with which we are not concerned herein. We have already discussed elsewhere in this judgment that reimbursement of medical expenses in our view certainly falls within the wide and inclusive definition of "salary" which includes, inter alia, profits in lieu of or in addition to any salary or wages. We may also add that where the assessee bears the expenses in respect of any obligation which would have been payable by the employee, the definition of perquisite in Explanation 2(b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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