Law: Income Tax Act, 1961

Section: 256(1)

(a) Income Tax----Business expenditure----Disallowance of expenditure above prescribed limit------Traveling expensed of employee or any other person Meaning of any other person in R. 62(2) ----Any other person would include a director or Managing Director----Traveling expenses of Director or Managing Director above prescribed limit can be disallowed-----Indian Income Tax Rules, 1962, R. 6D. (b) Income-tax--- ----Business expenditure---Disallowance of expenditure---Commission paid to employees Shipping agent---Finding that employees canvassed for orders for their employer--Extent of allowance of commission paid would depend on the facts of relevant previous year. Sub-rule (2) of rule 6D of the Income-tax Rules, 1962 places a ceiling on the traveling expenses incurred by an employee or any other person to be allowed as expenditure. In view of the expression any other person used in the4 sub-rule even if a director or a Managing Director is not an employee of the company, the ceiling prescribed by sub-rule (2) of rule 6D applies. A Director or a Managing Director of a company will come within the expression "any other person" mentioned in rule 6D(2) and deduction can be allowed for the traveling expenses incurred by them within the ceiling prescribed there under. CIT v. Autofin Ltd. (1985) 151 ITR 741 (AP) fol. The assessee was a private limited company carrying on business as agents of various shipping companies for the ports of Madras, Kakinada and Nagapattinam. The employees of the assessee used to canvass for cargo, etc., for various ships of their principal and for such canvassing, the assessee was making payment either as commission or service charges to its employees, for which deductions were claimed for the assessment years 1975-76 to 1979-80., Part of the commission paid had been allowed. For the assessment year 1980-81, the assessment was set aside by the Commissioner of Income-tax with a direction to make a fresh assessment after disallowing the commission/service charges paid by the assessee to its employees in toto. Accordingly, the entire commission/service charges paid by the assessee to its employees were disallowed by the Assessing Officer. The…

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