9911796707
|
Home
Issues:
1. Disallowance of remuneration and perquisites provided to directors. 2. Application of relevant provisions of the Companies Act, 1956. 3. Accrual of liability under the mercantile system of accounting. 4. Interpretation of sections 310 and 268 of the Companies Act, 1956. Analysis: 1. The case involved the disallowance of remuneration and perquisites provided to directors by the assessee company. The dispute arose regarding the approval of the Company Law Board and the Central Government for the increased remuneration, as per the provisions of the Companies Act, 1956. 2. The assessee contended that the liability for remuneration and perquisites was accrued within the accounting year, even though the approval from the Central Government was received after the accounting period. The argument was based on common practice and the requirement to provide for known liabilities in the accounts. 3. The revenue authorities argued that the liability did not accrue within the accounting year as the approval for increased remuneration was granted after the accounting period. They highlighted the importance of approval from the Central Government for such provisions under the Companies Act, 1956. 4. The Tribunal analyzed the Supreme Court decision in Nonsuch Tea Estate Ltd. v. CIT, emphasizing the accrual of liability under the mercantile system of accounting. The Tribunal held that the liability arises only when the approval is received, not when the decision is made or known. The distinction between sections 310 and 268 of the Companies Act, 1956 was also discussed, concluding that the distinction made by the assessee was not valid. 5. Ultimately, the Tribunal upheld the disallowance of the amounts related to remuneration and perquisites, stating that the liability did not accrue within the relevant accounting period. The appeal of the assessee was dismissed based on the failure to establish the accrual of liability within the specified accounting year.
|
