COMMISSIONER OF INCOME TAX Vs. INDOPOL LIMITED

JUDGEMENT

(1.) THIS reference under S. 256(1) of the IT Act, 1961, is made at the instance of the Revenue. It raises the following question :

(2.) THE ITO disallowed the expenditure because it related to perquisites which were in excess of one fifth of the salaries of the foreign technicians of the assessee company. The AAC, in appeal, confirmed the disallowance. The Tribunal, in further appeal, pointed out that salaries of foreign technicians were exempt from tax so that they were not chargeable under the head " Salary ". The Tribunal, therefore, held that the perquisites allowed to the foreign technicians were not to be considered under the provisions of S. 40(c)(iii) or S. 40(a)(v) of the IT Act, 1961, by virtue of the provisos to those sub sections.

(3.) THE Madras High Court in Addl. CIT vs. Brakes India Ltd. (1979) 118 ITR 820(Mad), took the view that the words " seven thousand five hundred rupees or less "would include a " nil " amount and could not be understood to mean from one rupee to Rs. 7,500 ". The Court was unable to find any rationale or logic for not giving the benefit of the proviso to a case where no part of the amount paid was chargeable under the head " Salary ".