SENGUPTA,J. - (1.) IN this reference under s. 256 (1) of the IT Act,1961 ('the Act') for the asst. yr. 1980-81, the following questions of law have been referred to this Court: "1. Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that the provisions of s. 40 (c) of the IT Act,1961, are applicable to the expenditure on remuneration payable or benefits or amenities provided to the whole time directors of the assessee-company when there is no finding that such expenditure is excessive or unreasonable having regard to the legitimate business need of the company? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that cash payment on account of reimbursement of medical expenses of the directors could be included in the value of benefit or amenity for the purpose of disallowance of amounts in excess of the limits laid down under the provision of the IT Act,1961? 3. Whether, on the facts and in the circumstances of the case, Tribunal erred in holding that the excess payment of Rs.7,753 made on account of fluctuations in the exchange rate of dollars, at the time of repayment of the dollar loan, raised from ICICI for purchasing machinery from abroad, was a capital expenditure and not an allowable revenue expenditure? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the commission paid to the whole time directors is covered by the term 'remuneration' as envisaged in s. 40 (c) of the Act? 5. Whether, on facts and in the circumstances of the case, the Tribunal erred in holding that the expenditure incurred during the stay of the employees or other persons outside the headquarters for the purpose of the business of the assessee is expenditure on travelling subject to the provisions of section37 (3) , r/w r. 6D of the IT Rules, 1962?" It is not in dispute that some of these questions are concluded by the decisions of this Court and, accordingly, it is not necessary to set out in detail the facts and circumstances relating to those questions.
(2.) IN view of the decision of this Court in the case of Bilaspur Spg. Mills and Industries Ltd. vs. CIT (1982) 135 ITR 496, the first question is answered in the negative and in favour of the Revenue. The second question relates to the medical reimbursement paid to the whole time directors. The question was a to whether such medical reimbursement should be taken as a perquisite allowed by the assessee to its directors for the purpose of computing the disallowance under s. 40 (c) of the Act. Both the ITO and the CIT (A) held that the reimbursement of medical expenses formed part of benefit or amenity allowed to the whole time directors. The Tribunal relying on the Special Bench decision in the case of Glaxo Laboratories (India) Ltd. vs. Second ITO (1986) 18 ITR 226 (Bom) upheld the decision of the Revenue authorities.
(3.) THERE are, in fact, some decisions which lay down that the reimbursement of medical expenses by the assessee-company to its directors being a cash payment has to be treated as part of the salary for the purpose of computing the disallowance under s. 40 (c) /40A (5) of the Act. There are a number of decisions holding that cash payment cannot be comprehended by the word 'perquisite' because the definition of perquisite in Explanation 2 below s. 40A (5) admits of only non-monetary benefits being construed as perquisites. Any cash payment cannot come within the meaning of that word in view of that definition. This Court has taken this view in CIT vs. Kanan Devan Hills Produce Co. Ltd. (1979) 119 ITR 431,CIT vs. Tecalemit (Hind) Ltd. (1982) 137 ITR 285 and Indian Leaf Tobacco Development Co, Ltd. vs. CIT (1982) 137 ITR 827. However, in those decisions this question was not raised whether such cash payment is cash allowance and includible in the quantum of remuneration or value of benefit or amenity or salary.;