LexCIT, MADRAS versus BRAKES INDIA LTD.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
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C.l.T., MADRAS
v.
BRAKES INDIA LTD.
APRIL 6, 1993
(B.P. JEEVAN REDDY AND N. VENKATACHALA, JJ.)
Income tax Act, 1961:
A
B
Sections 10(6)(vii) and 40(c)(iii)-Salary paid to Foreign Technical
Directol'-Exempt under the head 'Sa/aries'-Whether could be included in C
tfle total income.
During the accounting order relevant to assessment year 1965-66,
the Respondent-assessee paid to its foreign technical director a total
remuneration of Rs. 66,000 including a sum of Rs. 28,576 paid by way of
perquisites. The Income-tax Officer allowed only a sum of Rs. 13,200 by D
way of perquisites and disallowed the balance of Rs. 15,376 in view of
Section 40(c)(iii) of the Income-tax Act, 1961.
On an appeal by the assessee, the Appellate Assistant Commissioner
held that since the salary of the foreign technical director was exempt E
under S.10(6)(vii), the provision contained in Sec.40(c)(iii) was not ap-
plicable. Revenue preferred an appeal and the Tribunal held that
S.40(c)(iii) was applicable. At the instance of the Assessee, Tribunal
referred the question to the High Court. Since the High Court answered
the question in favour of the assessee, Revenue preferred the present
appeal.
F
Dismissing the appeal, this Court,
HELD: Under section 10(6)(vii) of the Income-tax Act, 1961 the
remuneration due to any technician, who was not a resident in any of the
four financial years immediately preceding the financial ye'!r in which he G
arrived in India, chargeable under the head 'salaries', for services
1--
rendered as a technician, was exempt. Thus in the instant case, the salary
paid to the foreign technical director was admittedly exempt under Section
10(6)(vii) of the Income-tax Act, 1961. In other words, it was nil for the
purposes of the Act. If so, the second proviso to sub-clause (iii) of S.40(c) H
993
994
SUPREME COURT REPORTS
(1993] 2 S.C.R.
A is attracted, inasmuch as 'nil' incoote, under the head "salaries" is less
than Rnpees seven thousand live hundred. By virtue of the said proviso,
the main provision in sub-clause (iii) goes out of picture. The High Court
reasoned that if income of one rupee is less than Rs. 7,500, there is no
reason for saying that 'nil' income is not an income less than Rs. 7,500.
B
The High Court was right in taking the view that since the income ex·
empted under Section 10 is not liable to be included in the total income, .
such exempted salary income should be treated as 'nil' income for the
purposes of Section 40(c)(iii) of the Act. [996 B·E)
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1287{NT)
C of 1982.
"#
From the Judgment and Order dated 22.2.1978 of the Madras in Tax
~
Case No. 24 of 1975.
M. Gaurishankar Murthy, C. Ramesh, P. Parmeswaran and Ms. A.
D Subhashini for the Appellant.
E
F
Ms. Janki Ramachandran fo: the Respondent.
The following Order of the Court was delivered
Iii this appeal preferred against the Judgment of the Madras High
Court, the words "whose income chargeable under the head 'salaries'
occurring in the second proviso to sub-clause (iii) of clause (c) of section
40 fall for interpretation. The assessment year concerned is 1965-66.
During the accounting year rclevar.t to the said assessment year, the
assessee paid to its foreign technical director a total remuneration of Rs.
66,000 including a sum of Rs. 28,576 paid by way of perquisites. The
Income-tax Officer held that by virtue of section 40(c)(iii) perquisites
exceeding one-lifth amount of the salary cannot be allowed as a deduction.
He held further, the second Proviso to the said sub-clause is not applicable
inasmuch as the income chargeable under the head salaries was not Rs.
G 7,500 or less. ~ccordingly he allowed only a sum of Rs. 13,200 by way of
perquisites. He disallowed the balance of Rs. 15,376.
The Appellate As;istant Commissioner, however, allowed the
assessee's appeal holding that inasmuch as the salary of the foreign tech-
nical director was exempt from tax under section 10(6)(vii), the provision
H contained in section 40(c)(iii) was not applicable. The appeal filed by the
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y
C.I.T. v. BRAKES INDIA LTD.
995
Revenue was allowed by the Tribunal. The Tribunal opined that merely A
because the salary is exempt under section 10(6)(vii), the provision in
section 40(c)(iii) does not cease to apply. Under the proviso to the said
sub-clause, only an employee whose income chargeable under the head
salaries was Rs. 7,500 or less is exempExcerpt shown. Read the full judgment & AI analysis in Lexace.