Law: Income Tax Act, 1961

Section: 32A,40A,37

(a) Income-tax---Business expenditure---Disallowance of expenditure above prescribed limit---Payment of salary to employee---Proportionate salary paid during stay outside India in ordinary course of employment---Not includible while computing disallowance---Indian Income Tax Act, 1961, S.40A. (b) Income-tax--- ----Business expenditure---Disallowance of expenditure above prescribed limit---Expenditure resulting in benefit or amenity to employee---Medical reimbursement--Not includible while computing disallowance---Indian. Income Tax Act,, 1961, S.40A. (c) Income-tax--- ----Business expenditure-Surtax- --Not deductible---Indian Income Tax Act, 1961, S.37. (d) Income-tax--- ----Investment allowance---Machinery for manufacture of heavy chemicals-Meaning heavy chemicals"---Parameter of tonnage applies to decide if chemical is "heavy"---Machinery for manufacture of tanning agents---Entitled to investment allowance---Indian Income Tax. Act, 1961, S.32A. The proportionate salary of employees of the assessee for the period of their stay outside India in the ordinary course of their employment should be excluded from the total salary while computing disallowance under section 40A(5) of the Income Tax Act, 1961. CIT v. Continental Construction Ltd. (1998) 230 ITR 485 (SC) fol. The amount representing medical remibursement given to employees. Which was not treated as perquisite in computing disallowance under section 40A(5) should not be treated as, part of salary for computation of disallowance under the said provision. CIT v. Indokem (Pvt.) Ltd. (1981) 132 ITR-125 (Bom.) fol. Surtax is not deductible in computing profits and gains of business. Smith Kline and French (India) Ltd. v. CIT (1996) 219, ITR 581 (SC) fol. During the relevant accounting year, the assessee acquired and installed machinery at the cost of Rs.1,06,02,027 for manufacture of the following tanning ,agents, viz., (1) diketene, (2) Acetoacetarylides and acetoeretamides, (3) acetic anhydride, (4) synthetic tanning agents. The Assessing Officer held that the items manufactured by the assessee were not heavy chemicals within the meaning of entry 26 and entry 27 of the Ninth Schedule. The Assessing Officer…

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