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TMI Blog1987 (11) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... e is a company. During the accounting years relevant to the assessment years 1974-75, 1975-76 and 1976-77, the assessee paid certain remuneration to two of its joint managing directors and claimed the same as deduction. The Income-tax Officer disallowed a portion of the amounts paid, applying the provisions contained in sub-section (5) of section 40A. On appeal, the Commissioner of Income-tax (Appeals) held that the correct provision applicable is section 40(c)(i) and not section 40A(5). Accordingly, he reduced the amount disallowed by the Income-tax Officer. The matter was then carried to the Tribunal. The Tribunal agreed with the opinion of the Commissioner of Income-tax (Appeals) that the correct provision applicable is section 40(c)(i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to in sub-clause (i) shall, in no case, exceed (A) where such expenditure or allowance relates to a period exceeding eleven months comprised in the previous year, the amount of seventy-two thousand rupees; (B) where such expenditure or allowance relates to a period not exceeding eleven months comprised in the previous year, an amount calculated at the rate of six thousand rupees for each month or part thereof comprised in that period : Provided that in a case where such person is also an employee of the company for any period comprised in the previous year, expenditure of the nature referred to in clauses (i), (ii), (iii) and (iv) of the second proviso to clause (a) of sub-section (5) of section 40A shall not be taken into account f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of clause (c) of section 40, 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 of seventy-two thousand rupees, shall in no case be allowed as a deduction: Provided further that in computing the expenditure referred to in sub-clause (i) or the expenditure or allowance referred to in sub-clause (ii) of this clause or the aggregate referred to in the foregoing proviso, the following shall not be taken into account, namely: (i) the value of any travel concession or assistance referred to in clause (5) of section 10 ; (ii) passage moneys or the value of any free or concessional passage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the three years immediately preceding the commencement of the business and such expenditure is deemed under the Explanation to clause (i) of sub-section (1) of section 35 to have been laid out or expended in the previous year in which the business is commenced, the limit referred to in this sub-clause shall, in relation to the previous year in which the business is commenced, be an amount calculated at the rate of five thousand rupees for each or part thereof comprised in the period of his employment in India during the previous year in which such business is commenced and in the period of his employment in India during which he was engaged in scientific research during the three years immediately preceding that previous year. (ii) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall not be taken into account; (ii) the aggregate of the expenditure and the Allowance referred to in sub-clauses (i) and (ii) of clause (a) of sub-section (5) and the expenditure and allowance referred to in sub-clauses (i) and (ii) of clause (c) of section 40 shall not exceed Rs. 72,000. It is necessary to point out that while section 40(c) deals with the expenditure incurred upon the directors of a company alone, subsection (5) of section 40A is not confined to companies ; only certain provisions of sub-section (5) are applicable to the employees of companies where they also happen to be the directors. It would thus be evident that it would be too simplistic to ask which of the provisions among the aforesaid two provisions are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Act, 1971, with effect from April 1, 1972. Sub-section (5) of section 40A practically corresponds to the Said provision). The court expressed the opinion that while section 40(a)(v) was a general provision applicable to all employees, whether employed by the company or not, section 40(c) is a special provision applicable only to directors of a company. Since special provision prevails over a general provision, it was held section 40(c) alone is applicable to director-employees of a company. The assessment year concerned therein was 1969-70 and the said opinion was expressed having regard to the provisions as they then stood and were considered by the court. The said decision cannot be taken as an authority on the provisions which fall for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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