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1999 Supreme(SC) 339
SUPREME COURT OF INDIA
Commissioner of Income-tax, Hyderabad
Versus
Indian Leaf Spring Manufacturing (P) Limited
Decided on : MARCH 18, 1999
The main legal point established in the judgment is the interpretation and application of the provisions of Sec. 40a (5) and Explanation 2 (b) thereto in determining whether certain payments formed part of 'salary' and were allowable as deduction from computing the assessable income of the company and not 'perquisite' disallowable u/s. 40a (5) or 40 (c) of the I. A. Act.
Headnote:
ITAT - Assessment Years 1979-80 to 1981-82 - The court considered whether the premia paid by the assessee on behalf of the employee-director formed part of 'salary' and were allowable as deduction from computing the assessable income of the company and not 'perquisite' disallowable u/s. 40a (5) or 40 (c) of the I. A. Act.
Fact of the Case:
The court was concerned with the Assessment Years 1979-80 to 1981-82 and the question of whether the premia paid by the assessee on behalf of the employee-director formed part of 'salary' and were allowable as deduction from computing the assessable income of the company and not 'perquisite' disallowable u/s. 40a (5) or 40 (c) of the I. A. Act.
Finding of the Court:
The High Court declined to call for a reference of this question, but the court found that a question of law did arise which should be considered by the High Court. The appeals were allowed, and the order under appeal was set aside. The question was to be referred by the Tribunal to the High Court for consideration, after drawing up a statement of case. No order as to costs. Appeal allowed.
Issues: The main issue was whether the premia paid by the assessee on behalf of the employee-director formed part of 'salary' and were allowable as deduction from computing the assessable income of the company and not 'perquisite' disallowable u/s. 40a (5) or 40 (c) of the I. A. Act.
Ratio Decidendi: The court's decision was influenced by the provisions of Sec. 40a (5) and Explanation 2 (b) thereto, which stated that the payment by its assessee of any sum, whether directly or through a fund, other than a recognised provident fund or an approved superannuation fund, to effect an assurance on the life of an employee or to effect a contract for an annuity is a perquisite.
Final Decision: The appeals were allowed, and the order under appeal was set aside. The question was to be referred by the Tribunal to the High Court for consideration, after drawing up a statement of case. No order as to costs. Appeal allowed.
( 1 ) WE are concerned with the Assessment Years 1979-80 to 1981-82. The question itself indicates the relevant facts. It reads thus:"whether on the facts and in the circumstances of the case, the ITAT is correct in law in holding that the premia paid by the assessee on behalf of the employee-director formed part of "salary" and allowable as deduction from computing the assessable income of the company and not "perquisite," disallowable u/s. 40a (5) or 40 (c) of the I. A. Act for the AYs 1979-80, 1980-81 and 1981-82. "the High Court declined to call for a reference of this question, having regard to its earlier judgments.
( 2 ) OUR attention is drawn to the provisions of Sec. 40a (5) and Explanation 2 (b) thereto where it is stated that the payment by its assessee of any sum, whether directly or through a fund, other than a recognised provident fund or an approved superannuation fund, to effect an assurance on the life of an employee or to effect a contract for an annuity is a perquisite. We think, in the circumstances, that a question of law does arise which should be considered by the High Court.
( 3 ) ACCORDINGLY, the appeals are allowed. The order under appeal is set aside. The question quoted above shall be referred by the Tribunal to the High Court for consideration, after drawing up a statement of case.
( 4 ) NO order as to costs. Appeal allowed.
