1984 (11) TMI 153 - AT - Income Tax

Summary

Issues:
1. Accrual of professional fees for services rendered by a deceased director.
2. Interpretation of Section 314(1)(a) of the Companies Act, 1956.
3. Application of post facto ratification for consent of company.
4. Inclusion of professional fees in the assessment for the year 1980-81.

Detailed Analysis:
1. The case involved a dispute regarding the accrual of professional fees amounting to Rs. 12,500 for services rendered by a deceased director to a company. The question was whether the fees accrued before or after the director's death on 15-10-1979, and if it should be included in the assessment for the year 1980-81.

2. The interpretation of Section 314(1)(a) of the Companies Act, 1956 was crucial in this case. The section stipulates that a director cannot hold an office or place of profit without the consent of the company through a special resolution. The argument centered around whether the consent was obtained before or after the director's death and how it affected the accrual of the professional fees.

3. The application of post facto ratification for the consent of the company was also debated. The contention was whether the ratification by the general meeting held on 17-5-1980, after the director's death, was sufficient to validate the accrual of the fees or if it should have been considered only in subsequent proceedings.

4. The final issue revolved around the inclusion of the professional fees in the assessment for the year 1980-81. The Appellate Tribunal upheld the decision that the fees accrued to the director immediately after the completion of services, and the post facto ratification did not affect the accrual. Therefore, the fees were rightly included in the assessment for that year.

In conclusion, the judgment clarified the application of Section 314(1)(a) of the Companies Act, 1956, and determined that the professional fees accrued to the director before his death, making it assessable for the year 1980-81. The appeal filed by the assessee was dismissed, affirming the inclusion of the fees in the assessment.