Commissioner of Income Tax vs Ahmedabad New Cotton Mills Co. Ltd.

Heard learned counsel for the revenue. No one appears for the assessee in spite of service.

At the instance of CIT following questions of law arising out of order of Tribunal dated 30.8.83 in Income Tax Application No. 594 of 1982 relating to assessment year 1979-80 have been referred to this court for its opinion:

"1.Whether, on the facts and in the circumstances of the case, the reimbursement of medical expenses to Managing Directors could not be considered as disallowance for the purpose of computation u/s. 40(c) of the I.T.Act, 1961?"

2.Whether the appellate tribunal has been right in law in holding that for the purposes of sec. 40(c) the payment of premium for personal accident insurance of the Managing Director could not be treated as disallowance while computing the same u/s. 40(c) of the I.T.Act, 1961?

3.Whether, on the facts and in the circumstances, of the case, the appellate tribunal has been right in law in holding that the assessee is entitled to extra shift-allowance on exhaust fans costing Rs.58339/- fitted in factory premises?

4.Whether on the facts and in the circumstances of the case, the expenditure of Rs.38948/incurred by the assessee for the issue of bonus incurred by the assessee for the allowance as revenue expenditure?

According to the learned counsel for the revenue, as far as question No.1 is concerned, this Court in Commissioner of Income Tax Vs. Deepak Family Trust No. 1 and Others, and Commissioner of Income Tax Vs. Synpol Products Pvt. Ltd., has taken the view that the reimbursement of medical expenses to Managing Directors are to be considered as remuneration for the purpose of computing disallowance u/s 40(c) of the Income Tax Act, 1961. Following the aforesaid decision, Question No.1 is answered in negative that is to say in favour of the revenue and against the assessee.

Regarding question 2 it has been pointed out that it has been held by this court in Ambica Mills Ltd. Vs. Commissioner of Income Tax, that the payment of premium for personal accident insurance of the Managing Director has to be considered as part of remuneration for computing disallowance u/s 40(c) of the Income Tax Act, 1961. Following the aforesaid decision, this question is also answered in negative that is to say in favour of revenue and against the assessee.

Question 3 relates to extra shift allowance on exhaust fans. The Tribunal has followed its decision in Saraspur Mills Case which was subject matter of ITR 70 of 1984. The aforesaid reference has been decided on 5.2.197 in favour of revenue and against the assessee by holding that extra shift allowance is not allowable on exhaust fans. Following the aforesaid decision, question 3 referred to above is answered in negative that is to say in favour of the revenue and against the assessee.

About question 4 it has been pointed out that the apex court in Brooke Bond India Limited Vs. Commissioner of Income Tax, West Bengal-III, Calcutta, has held that expenditure incurred by company for the purpose of issue of bonus shares are in the nature of capital expenditure and not allowable expenditure. Thus question 4 also merits to be answered in negative against the assessee in favour of the revenue.

Accordingly all the questions referred to above are answered in the negative that is to say in favour of the revenue and against the assessee.

Reference accordingly stands disposed of with no order as to costs.