Commissioner of Income Tax vs Porritts Spencer (Asia) Ltd.

Adarsh Kumar Goel, J.—The Tribunal Delhi Bench C Delhi, has referred the following substantial questions of law for opinion of this Court, arising out of its order dated 23-10-1982 in ITA Nos. 928/Del/79 and 944/Del/79, for the assessment year 1976-77, at the instance of the revenue:

IT Ref. No. 2 of 1984

(1) Whether on the facts and in the circumstances of the case, the expenditure of Rs. 19,186 incurred on the maintenance of the accommodation provided to Mr. N. Nath, Rs. 24,446 by way of reimbursement of the medical expenses and Rs. 13,560 out of servants wages constitute perquisite for computation of the disallowance u/s 40A(5) of the Income Tax Act, 1961 ?

(2) Whether on the facts and in the circumstances of the case the disallowance on account of perquisite value of car provided by the assessee to the director-employee Mr. N. Nath should be computed in accordance with Rule 3 of the Income Tax Rules, 1962 ?

(3) Whether on the facts and in the circumstances of the case, the rent of the garage and servant quarters constitute perquisite for the purpose of working out the disallowance u/s 40A(5) of the Act ?

(4) Whether on the facts and in the circumstances of the case, the disallowance under Rule 6D of the Income Tax Rules should be worked out by making the computation according to the aggregate expenditure incurred by each and every employee during the year and not on the basis of per trip ?

(5) Whether on the facts and in the circumstances of the case, the provisions of Rule 6D of the Income Tax Rules, 1962 are applicable in respect of the stay of Mr. H. Ingham ?

IT Ref. No. 3 of 1984

(1) Whether on the facts and in the circumstances of the case, the amount of Rs. 20,027 and Rs. 3,600 respectively representing proportionate expenses for personal use of car and garage rent should be treated as perquisite for the purpose of working out the disallowance u/s 40A(5) of the Income Tax Act, in the case of Shri K. C. Tapedar, an employee of the company ?

(2) Whether on the facts and in the circumstances of the case, the sum of Rs. 9,397 reimbursed to the employee as house rent allowance should be treated as perquisite for the purpose of disallowance u/s 40A(5) of the Act ?

(3) Whether on the facts and in the circumstances of the case, the assessee was entitled to the depreciation on the technical know-how capitalized by the assessee company ?

2.The assessee is a company incorporated under the Companies Act,1956. The assessee, inter alia, made following claims during the assessment year in question:

(i) Deduction of expenditure incurred on the maintenance of accommodation provided to Shri N. Nath, one of the directors. Medical reimbursement and servants wages to different employees.

{ii} Perquisite value of car provided to Shri N. Nath.

(iii) Rent of garage and servant quarter.

(iv) Travelling expenditure.

(v) Expenditure on stay of Shri H. Ingham.

(vi) Expenses on personal use of car and garage rent.

(vii) Amounts spent on use of car. The assessee claimed that the entire amount spent on car was for its business and so was the garage rent, and added back Rs. 19,186 towards maintenance of accommodation provided to Shri N. Nath; Rs. 24,446 towards reimbursement of medical expenses; Rs. 13,560 towards servants wages, which were held to constitute perquisite for computing disallowance u/s 40A(5) of the Act, perquisite value of car provided to Shri N. Nath was held to be disallowable; rent of garage and servant quarter were held to constitute perquisite for disallowance under section40A(5); expenditure incurred on travelling was held to be disallowable under Rule 6D by making computation according to aggregate expenditure incurred; Rule 6D was held to be applicable in respect of expenditure on stay of Shri H. Ingham; proportionate expenses on personal use of carand garage rent attributable to personal use was directed to be worked out towards disallowance u/s 40A(5); amount reimbursed towards HRA being Rs. 9,397 was treated as perquisite u/s 40A{5) and claim for depreciation on technical know-how capitalized by the assessee was disallowed.

The Commissioner (Appeals) partly allowed the claims of the assessee, which gave rise to ITA No. 928/Del/l983 (1979), at the instance of the revenue (it is pointed out that 1983 is a mistake in the printed paper book) and ITA No. 944/Del/1979 at the instance of the assessee.

The Tribunal accepted the appeal of the assessee and rejected the appeal of the revenue.

We have heard learned Counsel for the parties and perused the record.

Learned Counsel for the parties state that all the questions referred are already covered by earlier judgments of the Honble Supreme Court or of this Court.

We proceed to dispose of the questions referred as under.

IT Ref No. 2 of 1984

Re : Q. No. 1

It has not been disputed by the learned Counsel for the parties that the question of expenditure on maintenance of accommodation provided to Shri N. Nath is covered in favour of the revenue by judgment of this Court in Commissioner of Income Tax Vs. Porritts and Spencer (Asia) Ltd., . Following the said judgment, we decide this part of the question in favour of the revenue and against the assessee.

It is further undisputed that question with regard to claim for medical reimbursement stands covered in favour of the assessee by the judgment of the Honble Supreme Court in Commissioner of Income Tax, Bombay, etc. Vs. M/s. Mafatlal Gangabhai and Co. (P) Ltd., . Accordingly, this part of the question is decided against the revenue and in favour of the assessee.

It is undisputed that question with regard to wages of servants is covered in favour of the revenue by judgment of the Honble Supreme Court in Commissioner of Income Tax, Bombay City-III, Bombay Vs. British Bank of Middle East, and judgment of this Court in Porritts & Spencer (Asia) Ltd. (supra). Accordingly, this part of the question will stand answered in favour of the revenue and against the assessee.

Re. Q. No. 2

It has not been disputed that the question is covered against the assessee by judgment of the Honble Supreme Court in British bank of Middle East (supra). Accordingly, this question will stand answered in favour of the revenue and against the assessee.

Re. Q. No. 3

It is undisputed that this question is covered in favour of the assessee by judgment of this Court dated 16-9-2008 in IT Ref. Nos. 80 to 82 of 1982, Porritts & Spencer (Asia) Ltd. v. CIT reported at (2009) 17 DTR (P&H) 315 --Ed.). Accordingly, this question will stand answered in favour of the assessee and against the revenue.

Re. Q. No. 4

It is not disputed that this question is covered against the assessee by judgment of this Court in Commissioner of Income Tax Vs. Porritts and Spencer (Asia) Ltd., . Accordingly, this question is answered in favour of the revenue and against the assessee.

Re. Q. No. 5

It is not disputed that this question is covered against the assessee by judgment of this Court dated 16-9-2008 in IT Ref. Nos. 80 to 82 of1982 (supra) in the case of the assessee itself. Accordingly, this question will stand answered against the assessee and in favour of the revenue.

IT Ref No. 3 of 1984

Re. Q. No. 1

It is not disputed that identical question has been answered in favour of the assessee in judgment of this Court dated 16-9-2008 in the case of the assessee itself in IT Ref. Nos. 80 to 82 of 1982 (supra). Accordingly, this question will stand answered against the revenue and in favour of the assessee.

Re. Q. No. 2

It is not disputed that identical question was answered in favour of the assessee in judgment of the Honble Supreme Court in Mafatlal(supra) and Sukhjit Starch and Chemicals Ltd. Vs. Commissioner of Income Tax, . Accordingly, this question will stand answered against the revenue and in favour of the assessee.

Re. Q. No. 3

s not disputed that identical question has been answered in favour of the assessee in judgment of this Court in Porritts and Spencer (Asia) Ltd. Vs. Commissioner of Income Tax, . Accordingly, this question will stand answered against the revenue and in favour of the assessee.

References are disposed of accordingly.