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TMI Blog1989 (5) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts and not revenue receipts assessable to tax ? 2. Whether, on the facts and in the circumstances of the, case, the Tribunal was justified in holding that the reimbursement of out of pocket expenses amounting to Rs. 21,000 actually incurred by the directors of the assessee-company is an entertainment expenditure which falls within the mischief of section 37(2A) of the Income-tax Act, 1961, and in so holding whether the Tribunal acted perversely ? 3. Whether the Tribunal was justified in upholding the disallowance of reimbursement of expenses amounting to Rs. 21,000 actually incurred by the directors of the assessee-company and in holding that the said reimbursement of expenses was in the nature of entertainment allowance or enterta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f bonus of Rs. 7,400 as "salary". The assessee paid remuneration of Rs. 91,498 to one of its employees, Shri P. K. Ambani, who retired during the previous year relevant to the year under reference. This amount represented salary of Rs. 30,000, bonus of Rs. 4,998, leave salary of Rs. 10,000 and cash gratuity of Rs. 46,500. The Income-tax Officer disallowed Rs. 31,498 out of the aforesaid amount of Rs. 91,498 under section 40A(5) as this amount represented excess over Rs. 60,000. On appeal, the Appellate Assistant Commissioner held that the receipts arising out of transfer of import entitlements were revenue receipts. He also held that the Income-tax Officer was justified in disallowing the amount of Rs. 21,000 as entertainment expenses. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the Tribunal referred to above. The Tribunal was of the opinion that the order of the Tribunal in the case of one of the directors of the assessee-company did not help the assessee because, in that case, the question for consideration was whether a fixed allowance granted to a director for meeting expenses to be incurred in the performance of his duties comes within the mischief of section 37(2). But, in the present case, the assessee-company incurred expenses by way of giving allowance for meeting the entertainment charges. The Tribunal, therefore, upheld the order of the Appellate Assistant Commissioner on this point. The Tribunal also upheld the order of the Appellate Assistant Commissioner restricting the allowance of payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icable in respect of payment of salary and retirement benefits made to Shri Ambani during the year under reference. The Tribunal, after hearing the submissions made before it by both the parties, upheld the order of the Appellate Assistant Commissioner on this point too. So far as the first question is concerned, it is now concluded by a decision of this court in the case of this assessee in Jeewanlal (1929) Ltd. v. CIT [1983] 139 ITR 865. Following the said decision, we answer the first question by saying that the receipt of Rs. 1,40,864 arising out of the transfer of the import entitlements is not a capital receipt but a revenue receipt assessable to tax. So far as the second question is concerned, as we have already indicated, the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the facts of the present commercial and industrial climate. In a contract of service, apart from basic salary, dearness allowance, bonus and several allowances are payable to employees. All these payments would come within the scope of salary. For the reasons aforesaid, we answer the fourth question in the affirmative and in favour of the Revenue. So far as the fifth question is concerned, the Appellate Assistant Commissioner found that the total remuneration amounts to Rs. 91,498. It consists of the following amounts: Rs. Salary 30,000 Bonus 4,998 Leave salary 10,000 Cash gratuity 46,500 --------------- 91,498 --------------- The Income-tax Officer has disallowed Rs. 31,498 under section 40A(5) which represents the exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection and the total amount in the said year including his salary and gratuity exceeded the limit prescribed for a former employee. Accordingly, the Tribunal dismissed the appeal on those facts. On a reference, this court held that an employee can be paid up to Rs. 5,000 per month which could be claimed as deduction. A former employee can be paid in the aggregate or at a time up to Rs. 60,000 in the year. The section itself indicates that an employee who retires during a particular previous year would be a former employee and, accordingly, the question which was referred was answered by saying that the sum of Rs. 22,000 paid as salary to the employee is allowable under section 40A(5)(c) of the Act. In view of the said decision, we answer t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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