1980 (10) TMI 95 - AT - Income Tax

Summary

Issues:
1. Taxability of commission received by the Managing Director as salary income or income from other sources.
2. Inclusion of whole income from jointly owned property in the assessee's total income.
3. Addition of Rs. 47,355 based on cash reconciliation.

Issue 1 - Taxability of Commission:
The appeal concerns the tax treatment of a Managing Director's remuneration, specifically a commission of Rs. 1,51,600. The assessee argued that the commission should not be considered salary income but income from other sources due to the nature of his role and the company's Memorandum and Articles of Association. The IT department, however, treated the commission as salary income under section 17(1)(iv). The Appellate Tribunal noted that the Managing Director was not a servant but an agent of the company, thus ruling that the remuneration received is income from other sources. The Tribunal directed a fresh consideration by the CIT (A) to determine if the amount could be taxed on a cash basis.

Issue 2 - Inclusion of Jointly Owned Property Income:
The second ground of appeal challenged the inclusion of the entire income from a jointly owned property in the assessee's total income. Discrepancies arose regarding previous assessments and orders. The Tribunal set aside the CIT (A) order and instructed a reevaluation of facts to determine whether full or half of the property's income should be included in the assessee's total income.

Issue 3 - Addition based on Cash Reconciliation:
The final ground of appeal addressed an addition of Rs. 47,355 based on cash reconciliation. The CIT (A) had allowed a benefit of Rs. 8,000, reducing the addition from Rs. 55,355 to Rs. 47,355. The assessee argued that the sustained addition could be attributed to three items: personal expenses estimate, unexplained bank deposits, and differences in agricultural income estimates. The Tribunal upheld the estimate of personal expenses and agricultural income but ruled in favor of the assessee regarding the unexplained bank deposits, reducing the addition by Rs. 23,500.

In conclusion, the appeal was partly allowed, with directions for a fresh assessment on the taxability of the commission and a reevaluation of the jointly owned property income inclusion. The addition based on cash reconciliation was reduced in favor of the assessee.