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TMI Blog1949 (3) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... s paid ₹ 6,000 in the year of account. The Income-tax Officer considered the claim and allowed only a sum of ₹ 1,000 in all for both the employees and the balance of ₹ 11,000 was disallowed by him. The Tribunal came to the conclusion that the sum of ₹ 11,000 was rightly disallowed by the Income-tax Officer, as according to the view of the Tribunal only one thousand rupees had been expended wholly and exclusively for the purpose of the assessee's business. Now, Sir Jamshedji's contention is that it is for the employer to determine what remuneration he should pay to his employee for the services rendered by him. In this case it is not disputed that there was an agreement between the employer and the employees to pay 20 per cent. of the net profits of the business. Nor is it disputed that in fact the sum of ₹ 6,000 was paid to each of the employees. From these admitted facts Sir Jamshedji contends that the quantum of the payment should be left to be determined by the employer and should not-be considered by the Income-tax Officer. Sir Jamshedji contends that an Income-tax Officer can never be in a position to judge as to how and in what manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Officer was based on no evidence at all. If the assessee satisfies the Court that apart from the actual payment and existence of the agreement there were no other factors which were taken into consideration by the Income-tax Officer, then perhaps the Court would say that the Income-tax Officer was not justified in coming to the conclusion that he did. These principles are in conformity, in my opinion, with what the Privy Council laid down in a similar case decided in Aspro, Limited v. Commissioner of Taxes (1) [1936] 4 ITR 264. In that case there were two shareholders of a company and they were also the sole directors of the company. At the end of each trading year the company fixed at a general meeting about two-thirds of the profits as directors' fees, and in the year 1931 as large a sum as 10,000, was debited in the accounts as directors' fees. The Commissioner of Income-tax disallowed this item to the extent of 8,000, and the question that fell to be considered by their Lordships of the Privy Council was whether this disallowance was justified and their Lordships point out at page 269 in the judgment that the true issue that arises in cases like this is wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e special service to their masters. Sir Jamshedji says that in this case there is no evidence of any extraneous or extra commercial consideration having entered into the payment by the employer to the employee of this amount. In my opinion, it was open to the Tribunal to raise an inference that so large an amount could not have been paid purely for commercial considerations, and that inference the Tribunal has definitely raised by pointing out that these employees were not rendering any specific and important service to the employer to entitle them to earn this large commission. In my opinion, therefore, the Tribunal was right in disallowing the sum of ₹ 11,000 out of the sum of ₹ 12,000 paid by the employer to his employees as commission. One more question also arises on this reference and that is with regard to whether the disallowance of this very sum for the purpose of excess profits tax is justifiable or not. The contention of the assessee was that the disallowance with regard to this sum was made under Rule 12 of Schedule I to the Excess Profits Tax Act, and before a disallowance can be made under that rule the consent of the Commissioner of Excess Profits Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r opinion on the questions of law that arise or on the case that is stated by them. Such opinion as they have is to be found and to be gathered from their decision. But apart from that there can be no question of the Tribunal having to express any opinion. But with regard to the question as to who should formulate the questions with regard to which the case has to be stated, the position seems to be this. Under Section 66(1), after the decision is given by the Tribunal under Section 33(4), it is open either to the assessee or to the Commissioner to require the Appellate Tribunal to refer to the High Court any question of law arising out of their order and the Appellate Tribunal shall draw up a statement of their case and refer it to the High Court. Therefore, in that case obviously the statement of the case would contain the question of law which according to the Tribunal would arise out of their order. But in case the Tribunal refused to state the case on the ground that no question of law arises, the assessee or the Commissioner has been given the right to come to the High Court under Section 66(2) and the High Court, if it is not satisfied that the decision of the Appellate Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X
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