Ennore Foundries Ltd. vs Commissioner of Income Tax Commissioner of Income Tax Vs Ennore Foundries Ltd.

R. Jayasimha Babu, J.—Three questions at the instance of the Revenue and one at the instance of the assessee arising from the order of the

Income Tax Appellate Tribunal on the appeals preferred by the assessee, as also, by the Revenue which appeals arose out of the order of the

Commissioner in appeal with regard to the assessment made on the assessee for the assessment year 1985-86 are now before us.

The first question referred at the instance of the Revenue is, as to whether the assessee was entitled to investment allowance on the incremental

cost by reason of foreign exchange fluctuation. That question has already been considered by this court in the case of Commissioner of Income

Tax Vs. Chengalvarayan Co-operative Sugar Mills Ltd., , wherein, it was held that the liability of the assessee during the previous year on account

of the change in the rate of exchange was part of the actual cost of the machinery acquired from a foreign country, and the assessee was entitled to

investment allowance on the additional cost. This question is, therefore, answered in favour of the assessee, and against the Revenue.

The second question referred at the Revenue''s instance is as to whether in computing the amount of deduction admissible under Rule 6D read

with Section 37(3), the ceiling should be applied to the aggregate of all the tours made by the persons during the previous year and not to individual

tours. This question again has already been considered by this court in the case of Commissioner of Income Tax Vs. ASHOK LEYLAND LTD., ,

wherein, it was held, inter alia, that the intent of Rule 6D of the Income Tax Rules, clearly is that the computation required to be made under the

rule is to be made separately for each travel undertaken by the employee and the amount that can be claimed as deduction for the year is the

aggregate of the amount so calculated separately for each travel undertaken by the employee. This question is, therefore, answered in favour of the

Revenue, and against the assessee.

The question at the instance of the assessee is as to whether the expenditure incurred for reimbursement of medical expenses incurred by a

director could be treated as part of remuneration for purpose of computing the disallowance u/s 40(c). This question has already been considered

by this court in the case of Sundaram Industries Ltd. Vs. Commissioner of Income Tax, , wherein, it was held, inter alia, that the reimbursed

medical expenses would constitute benefit or amenity to the director and is required to be taken into account for computing the ceiling limit u/s

40(c) of the Act. This question is, therefore, answered in favour of the Revenue, and against the assessee.

The last question referred at the instance of the Revenue is as to whether part of the entertainment expenditure attributable to the staff of the

assessee was to be excluded from the disallowance u/s 37(2A) of the Act. Section 37(2A) of the Act was amended by adding Explanation

thereunder by the Finance Act, 1983, with effect from April 1, 1976. That Explanation provides that the expenditure incurred on food and

beverages provided by the assessee to its employees in office, factory or other places of work is not to be regarded as entertainment expenditure

for the purpose of Section 37(2A) of the Act from April 1, 1976. That amendment was brought about by the Finance Act, 1983.

As the assessment with which we are concerned is the assessment year 1985-86, the amended provision clearly applies. The question referred

is answered in favour of the assessee, and against the Revenue.