-= : 1 : =- IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORDINARY ORDINARY ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION INCOME TAX REFERENCE NO.488 OF 1998 INCOME TAX REFERENCE NO.488 OF 1998 INCOME TAX REFERENCE NO.488 OF 1998 The Commissioner of Income-tax ..Applicant. V/s. M/s.Varun Shipping Co. Ltd. ..Respondent. Mr.A.S.Rao for applicant. CORAM : V.C. DAGA AND CORAM : V.C. DAGA AND CORAM : V.C. DAGA AND J.P.DEVADHAR, JJ. J.P.DEVADHAR, JJ. J.P.DEVADHAR, JJ. DATED : 28TH MARCH, 2005. DATED : 28TH MARCH, 2005. DATED : 28TH MARCH, 2005. P.C. :- P.C. :- P.C. :- 1. In this reference, the questions referred for the opinion of this Court read as under :- "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the disallowance out of salaries and prequisites to employee directors, should be made under section 40(c) and not under the section 40A(5) of the Income-tax Act, 1961 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the expenditure incurred by the assessee, which is a shipping company resident in India, on payment of salary and provision of perquisites to its employee working abroad its ships, to the extent the expenditure pertains to the period during which the ships are outside Indian territory, should be construed as expenditure incurred in relation to the employees in respect of their period of employment outside India within the meaning of clause (b)(i) of the additional proviso to -= : 2 : =- section 40A(5) of the Income Tax Act, 1961 ? 2. So far as the first question is concerned, the same has been answered by the Division Bench of this Court in the case of C.I.T. V/s. Hico Products Pvt.Ltd. C.I.T. V/s. Hico Products Pvt.Ltd. C.I.T. V/s. Hico Products Pvt.Ltd. (No.1) [(1993) 201 I.T.R. 567 (Bom.)] (No.1) [(1993) 201 I.T.R. 567 (Bom.)] (No.1) [(1993) 201 I.T.R. 567 (Bom.)] in favour of the assessee and against the revenue. Whereas, the second question has also been answered by another Division Bench of this Court in the case C.I.T. V/s. Indo Oceanic C.I.T. V/s. Indo Oceanic C.I.T. V/s. Indo Oceanic Shipping Co. Ltd. [(2001) 247 I.T.R. 247 (Bom.) Shipping Co. Ltd. [(2001) 247 I.T.R. 247 (Bom.) Shipping Co. Ltd. [(2001) 247 I.T.R. 247 (Bom.) in favour of the assessee and against the revenue. 3. In the above view of the matter, both the questions are answered in the affirmative i.e. in favour of the assessee and against the revenue. Accordingly, reference stands disposed of with no order as to costs. (V.C. DAGA, J.) (V.C. DAGA, J.) (V.C. DAGA, J.) (J.P.DEVADHAR, J.) (J.P.DEVADHAR, J.) (J.P.DEVADHAR, J.)