Law: Income Tax Act, 1961

Section: 37,40,256

(a) Income-tax----Business expenditure---Remuneration to employees ---Superannuation fund---Entire initial contribution is deductible---Indian Income Tax Act, 196], S.37. (b) Income-tax----Business expenditure---Company---Ceiling on expenditure--­Remuneration and perquisites to, employee-Director---Section 40(c) is applicable and not S.40A(5)---Indian Income Tax Act, 1961, Ss.40(c) & 40A. The assessee is entitled to deduction of 100 per cent. of the initial contribution to the superannuation fund. The Assessing Officer has to apply the provisions of section 40(c) of the Income Tax Act, 1961, instead of section 40A(5) for working out the disallowances out of the remuneration and perquisites paid to the employee ­directors. CIT v. Hico Products (Pvt.) Ltd. (No.l) (1993) 201 ITR 567 (Bom.) and CIT v. Indian Engineering and Commercial Corporation (P.) Ltd. (1993) 201 ITR 723 (SC) fol. [The Supreme Court has granted special leave to the Department to appeal against this ---see (1998) 234 ITR (St.) 29--Ed.]. THIS JUDGMENT DELIVERED BY: By this reference under section 256(1) of the Income Tax Act, 1961, the Income-tax Appellate Tribunal has, at the instance of the Revenue, referred the following questions of law to this Court for opinion: "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that notwithstanding the notification issued by the Central Board of Direct Taxes the assessee is entitled to deduction of 100 per cent, of the initial…

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