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TMI Blog1989 (3) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. The total perks debited were valued at Rs. 9,600 during the accounting year relevant to the assessment year and salary of Rs. 18,000. The Income-tax Officer applied the provisions of section 40A(5)(c) of the Income-tax Act, 1961 (for short "the Act"), and came to the conclusion that the allowance on account of perquisites was to be restricted to 20 per cent. of the salary and allowed Rs. 3,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is placed on Travancore Rayons Ltd. v. CIT [1986] 162 ITR 732, a decision of the Kerala High Court for the proposition that if a director is also an employee of the company, then section 40A(5) of the Act is applicable and section 40(c) of the Act would not apply. The Tribunal relied upon a decision of the Gujarat High Court in Addl. CIT v. Tarun Commercial Mills Ltd. [1978] 113 ITR 745 it also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e director of the company was an employee. To such facts, as were before this court in Avon Cycles (P.) Ltd.'s case [1980] 126 ITR 448, section 40A(5) of the Act could not even remotely apply. The Tribunal fell into an error in referring to the decision while deciding the matter. On a reading of the judgments of the Kerala High Court in Travancore Rayons Ltd.'s case [1986] 162 ITR 732 and the Gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any salary to an employee, and the proviso further provides that where the assessee is company, so much of the aggregate of the expenditure referred to in sub-classes (i) and (ii) thereof in respect of an employee or a former employee, being a director or a person who has a substantial interest in the company or a relative of the director or of such person, as is in excess of the sum specified, sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght in law in holding that the provisions of section 40A(5) of the Act and clause (c) thereof are not applicable for the purposes of disallowing expenditure incurred by the assessee-company for the benefit of an employee who is also a director of the company. The correct provision applicable to the facts and in the circumstances of the case is section 40A(5) of the Act. Accordingly, the question i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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