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TMI Blog1968 (2) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee eventually came up to this court on a reference at his instance in which certain directions were given, with the result the Tribunal went into the question over again and held that the assessee was entitled to allowance of the entire remuneration paid to the directors in each of the years. The propriety of this view is the subject-matter of the first question under reference which is : " Whether, on the facts and in the circumstances of the case, the Tribunal's order allowing the remuneration of the managing director and director in full for the assessment years 1949-50 to 1953-54 as a proper claim under section 10(2)(xv) of the Income-tax Act is based on any material ? " There is also another question which raises the admis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v). That question, of course, has been approached from different angles. So far as the revenue is concerned, the point of view urged before the Tribunal was that, though the managing director had contributed very largely to the business of the assessee, the increase in the gross collections in the transport business of the assessee could be attributed to natural causes as, for instance, the increase in seating capacity, travel habits of the public and the economy in the working cost which came out of experience. Certain other considerations also were urged which basically did not differ from that approach of the revenue to the question of admissibility of the allowance. The Tribunal, however, was of opinion that the entire remuneration paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew, we would approach the question from a different standpoint. We accept the principle that for eligibility of an allowance under section 10(2)(xv), there should be a nexus between the expenditure and the purpose of the business and the expenditure should have been wholly and exclusively laid out for that purpose. The first part of this proposition may not raise any problem of complexity, for its determination will be on a factual basis. From the given facts, it should be easy to say whether there is any connection between the expenditure and the purpose of the business. But the expression, "wholly and exclusively laid out" is capable of raising fine questions. But we do not propose in this case to embark on that aspect, for it has not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he full allowance of the entire payment made as remuneration to the directors in the years in question. Mr. Balasubrahmanyan for the revenue tried a line of argument based on section 10(4A) and suggested that this provision is but clarificatory of section 10(2)(xv). He said that, though section 10(4A) was inserted on April 1, 1956, and the present case concerns the years prior thereto, nevertheless on the application of the principle of this new provision, we should probe into the circumstances of the payment of remuneration to the board of directors and rule that the assessee being a close company as it is, the revenue was justified in allowing only a part of the allowance claimed. In our opinion, the revenue is not entitled to take up th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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