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Issues Involved:
1. Disallowance of remuneration paid to Sri M. M. Thapar. 2. Allowability of expenditure incurred for bringing the dead body of the chairman from Delhi to Calcutta. Issue-wise Detailed Analysis: 1. Disallowance of Remuneration Paid to Sri M. M. Thapar: The primary issue concerns whether the payment of Rs. 73,308 to Sri M. M. Thapar by way of salary and profit commission was excessive or unreasonable, thus justifying the disallowance of a portion thereof under section 40(c) of the Income-tax Act, 1961. The Income-tax Officer allowed remuneration of Rs. 36,000 but disallowed Rs. 37,308, reasoning that such high remuneration could not have been justified purely on business considerations, especially given Thapar's short tenure and familial connection to the managing director. The Appellate Assistant Commissioner upheld this disallowance, noting that Thapar's qualifications and experience did not justify such high remuneration. The Tribunal, however, reversed this decision, referencing its order for the assessment year 1961-62, where it had allowed the full claim of remuneration to Thapar. The Tribunal emphasized that Thapar's appointment followed the retirement of another director, and no special post was created for him. It acknowledged Thapar's qualifications and experience in business and management, concluding that the remuneration was reasonable and justified. The High Court, following its decision in CIT v. Karam Chand Thapar & Bros. (P.) Ltd. [1978] 115 ITR 688 (Cal), answered the question in the negative, in favor of the assessee, stating that the payment was not excessive or unreasonable. 2. Allowability of Expenditure for Bringing the Dead Body of the Chairman: The second issue revolves around whether the expenditure of Rs. 16,737 incurred for bringing the dead body of the chairman, late Karam Chand Thapar, from Delhi to Calcutta was an allowable business expenditure. The Income-tax Officer and the Appellate Assistant Commissioner disallowed this claim, arguing that the expenditure was not wholly and exclusively laid out for business purposes. The Tribunal, however, allowed the claim, relying on the Delhi High Court's decision in CIT v. Supreme Motors (P) Ltd. [1972] 84 ITR 1, which held that similar expenses were incidental to the business and thus allowable. The Tribunal noted that Thapar was on a business tour to Delhi, and it was the company's responsibility to bring him back, whether alive or deceased. The High Court agreed with this reasoning, stating that the expenditure was incidental to the business carried on by the assessee and should be judged from the standpoint of commercial expediency. The Court emphasized that the death of Thapar did not alter the company's duty to bear the expenses for his return, thereby affirming the Tribunal's decision and allowing the expenditure as a business expense. Conclusion: The High Court ruled in favor of the assessee on both issues. For the remuneration paid to Sri M. M. Thapar, the Court found no excessive or unreasonable payment, thus disallowing the Income-tax Officer's adjustment. Regarding the expenditure for transporting the chairman's body, the Court deemed it a legitimate business expense, aligning with principles of commercial expediency.
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