Commissioner of Income Tax vs Industrial and Allies Sales (P) Ltd.

There is no appearance on behalf of the Assessee even though on the last date of hearing, that is, on 10th July, 2007 the Assessee was represented. The following questions of law have been referred for our opinion:

Whether on the facts and in the circumstances of the case, the ITAT was correct in law in holding that overall limit of Rs. 72,000/- is to be applied in cases of Director Employees for the purpose of computing disallowance u/s 40A(5) of the I.T. Act.

Whether on the facts and in the circumstances of the case, the ITAT was correct in law in holding that cash allowances like HRA & Reimbursement of Medical Expenses made by the assesses to its employees could not be considered as perquisite for the purposes of computing disallowance u/s 40A(5) of the I.T. Act.

In so far as question No. 1 is concerned, there is no doubt that the overall limit of Rs.72,000/- is to be applied to the cases of Director Employees for the purpose of computing disallowance u/s 40A(5) of the Income Tax Act, 1961 as provided for in the section itself. Accordingly, this question is answered in the affirmative, in favour of the Assessee and against the Revenue.

In so far as the second question is concerned, this is covered by decision of the Hon''ble Supreme Court in Commissioner of Income Tax, Bombay, etc. Vs. M/s. Mafatlal Gangabhai and Co. (P) Ltd., . Accordingly, this question is answered in the affirmative, in favour of the Assessee and against the Revenue. The reference is disposed of accordingly.