Commissioner of Income Tax vs Taylor Instrument Co. (I) Ltd.

By a common order passed by the Income Tax Appellate Tribunal u/s 256(l) of the Income Tax Act as it then stood, as many as five questions were referred by the Tribunal to us. Out of these five questions, two questions were referred at the instance of the revenue while three other questions were referred at the instance of the assessed. Three questions referred at the instance of the assessed in ITR Nos. 538-539/ 1983 were answered by us by our dated 11 -8-2005. Question No. 1, out of those questions was as under :

"Whether on the facts and in the circumstances of the case the Tribunal was right in holding that perquisite of rent-free accommodation provided to employees to the assessed should be valued u/s 40A(5) and not u/s 17, read with rule 3 of Income Tax Rules for assessment years 1973-74 and 1974-75."

The above question was answered against the assessed. The remaining two questions, which were as under, were also answered against the assessed and in favor of the revenue :

"Whether on the facts and in the circumstances of the case, the development rebate is allowable in respect of loose tools, amounting to Rs. 70,303. each item costing Rs. 750 or less ? and

Whether on the facts and in the circumstances of the case the provisions of section 144B could be applied to the assessment year 1973-74, to the assessment completed u/s 146 on 26-9-1977 and whether such assessment dated 26-9-1977 is time-barred in law and no enforceable demand could be raised on the basis of such assessment ?"

What now remains in the present two references are two questions which were referred by the Tribunal to us at the instance of the revenue. These questions are as under :

"Whether on the facts and in the circumstances of the case, the Incometax Appellate Tribunal was correct in law in holding that the reimbursement of the medical expenses was not a perquisite in the hands of the employees ? and

Whether on the facts and in the circumstances of the case, the ITAT was correct both on facts and in law in holding that the loose tools and block tools were entitled for development rebate under the Income Tax Act ?"

Ms. Bansal, learned counsel appearing for the revenue, fairly conceded that both these questions stand answered against the revenue by the pronouncements of the Supreme Court and different other High Courts in the country. Insofar as question No. 1 is concerned, she drew our attention to the decision of the Supreme Court in Commissioner of Income Tax, Bombay, etc. Vs. M/s. Mafatlal Gangabhai and Co. (P) Ltd., , where their Lordships have held that cash reimbursement of medical expenses was not a perquisite. To the same effect is the decision of this Court in Commissioner of Income Tax Vs. Shriram Refrigeration Industries Ltd., . In the light of these pronouncements, Therefore, we have no difficulty in answering question No. 1 above against the revenue and in favor of the assessed and in holding that cash reimbursement of medical expenses is not a perquisite in the hands of the employees but would constitute a part of the salary drawn by them.

Coming then to question No. 2 extracted above, the issue is in our view sufficiently covered by the decision of the Bombay High Court in Commissioner of Income Tax, Bombay City-II Vs. Chunilal Bhagwandas Mehta, , Commissioner of Income Tax Vs. Vulcan Laval Ltd., , Ms. Bansal also referred to us the Judgment of the Supreme Court in COMMISSIONER OF Income Tax, MADRAS Vs. MIR MOHAMMAD ALI. ARUNA MILLS LTD. : INTERVENER., to submit that the pronouncement of the courts elsewhere in the country as also the decision of the Supreme Court in the above case have recognised that development rebate can be claimed even on loose tools and block tools under the Income Tax Act. In that view Therefore question No. 2 must also be answered against the revenue and in favor of the assessed. We accordingly do so and hold that loose tools and block tools were rightly held by the Tribunal to be entitled to development rebate under the Income Tax Act.

With the above observations, ITR Nos. 536-37/1983 shall stand disposed of.