COMMISSIONER OF INCOME TAX Vs. NUTAN MILLS LIMITED

JUDGEMENT

(1.) IN this reference at the instance of the Revenue, the following questions have been referred to us for our opinion in respect of asst. year 1984 85 :

(2.) WE have heard Mr. B.B. Naik, learned counsel for the Revenue, instructed by M/s M.R. Bhatt & Co. Though served, none appears for the respondent assessee.

(3.) AS regards the allowability or otherwise of H.R.A. paid to the managing directors, the controversy is concluded in favour of the Revenue and against the assessee by the decision of this Court in Ambica Mills Ltd. vs. CIT (supra) wherein it has been held that S. 40(c)(i) of the Act includes direct cash payments to the director. Similar view has been taken in respect of payment of H.R.A. to the employees of the company in the context of S. 40A(5) of the Act. We accordingly hold that H.R.A. paid to the managing directors has to be considered for computing disallowance under S. 40(c) of the Act.