Excess Perquisite

[mchagla]

A company paying perquisites to its employees would be allowed such expense for tax purposes only if it is 50% of salary.

My question is, a company, the income of which is exempt from Income Tax under 1st Part of 2nd Schedule of ITO, 2001, if that company pays "excess perquisite" (e.g., Basic Salary - Rs. 50,000, HRA - Rs. 45,000) to its employees, what are the implications?

Mustafa

[Ali Akbar]

hay friend

yes it is very clear in ordinance that any expense which is not allowed shall be added back to TAXABLE INCOME. As far as your question is concerned, the company having exempt income means the company has no taxable income, then disallowed expenses will not be added back having regard to the income of the company which is exempt.

If you think in general sense, what benefit will the income tax department take by adding back disallowed expense to an exempt income.
Obviously there will be no adding back of disallowed expenses to an exempt income.

[aamersikandar]

Hi
It has been held under various decisions of superior courts that the exemptions are valid if only laws are followed. Where ever their is a departure from law, the income will be taxed. IN the instant case, the department will come to know about the incident through assessment of an assessees personal income specially if the assessee is also a director. Then the company financila statements shall be called and error detected. Subsequently it shall be added to income as taxed as non exempt income.
Thanks

Aamer Sikandar