NDLI: Commissioner of Income Tax, Delhi (central-i) Vs. M/s. Continental Construction Ltd.

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	Income Tax Act 1961 : Sections 40(c) 40A(5)(a) and (b)
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Act(s) Referred	Income Tax Act, 1961 (43 of 1961)
Case Type	Appeal
Court	Supreme Court of India
Disposal Nature	Appeal Dismissed
Headnote	Income Tax Act, I961 : Sections 40(c), 40A(5)(a) and (b)-Assessee-Civil construction company-Employee-Directors posted outside India-Remuneration paid in excess to the ceiling limit-Deductions claimed on the ground that amount paid to employee-Directors posted outside India not subjected to ceiling-Income Tax Officer disallowed the excess amount paid-On appeal, held, employee-Directors do not cease to be an employee-The expenditure incurred on an employee-Director is reasonable and necessary-Hence not subject to ceiling.The respondent-assessee was a civil construction company which had projects outside India. For the assessment year 1983-84, the assessee claimed deduction of the amount paid towards remuneration to its Directors. The Income Tax Officer disallowed the amount paid in excess over the limit prescribed under section 40( c) and 40A(5)(a) of the Income Tax Act, 1961. The respondent did not dispute the disallowance of the amount over the ceiling limit to the Indian based Directors but claimed that the amount paid to its employee-Directors employed outside India could not be taken into account, while calculating the ceiling under section 40A(5) or section 40(c). The Commissioner of Income Tax allowed the claim of the assessee. The Revenue unsuccessfully challenged the matter before the Tribunal and High Court. Hence the present appeal. The contention of the Revenue was that so long as the employee was also a Director, expenditure of the kind referred to in section 40A(5)(b) cannot be excluded from expenditure while calculating the ceiling limit under section 40(c) or section 40A(5)(a) such an exclusion is, however permissible only in the case of an employee who is not a Director at the relevant time when the expenditure was incurred.
Judge	Hon'ble Ms. Justice Sujata V Manohar
Neutral Citation	1998 INSC 56
Petitioner	Commissioner Of Income Tax, Delhi (central-i)
Respondent	M/s. Continental Construction Ltd.
SCR	[1998] 1 S.C.R. 519
Judgement Date	1998-02-03
Case Number	3311

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