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TMI Blog1997 (9) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... the apex court against the assessee in CIT v. Sun, Engineering Works P. Ltd. [1992] 198 ITR 297. Therefore, the second question of law raised in T.C. No.709 of 1982 is answered in the affirmative. We will discuss the other two questions of law a little later. So far as the assessment year 1975-76 is concerned both the questions of law referred to us have been answered against the assessee, one by the judgment in CIT v. Elgi Rubber Products Ltd. [1996] 219 ITR 109 (Mad) and the second by the judgment in Smith Kline and French (India) Ltd. v. CIT [1996] 219 ITR 581 (SC). Therefore, in Tax Case No. 710 of 1982 relating to the assessment year 1975-76 we answer both the questions of law raised before us in the affirmative following the said ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain legal provisions, that may not amount to information simpliciter for the purpose of section 147(b) of the Act. Without wasting much time on this issue, we would straightaway refer to the judgment of the Supreme Court in Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996. That was almost an identical case where the assessment was reopened on the basis of the report of the audit party. The question is answered by the apex court in the following words: "But although an audit party does not possess the power to so pronounce on the law, it nevertheless may draw the attention of the Income tax Officer to it. Law is one thing, and its communication another. If the distinction between the source of the law and the communicator of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re information of the audit party that the Income-tax Officer had omitted to consider the application of section 40(c) of the Act would certainly constitute information enabling him to reopen assessment under section 147(b) of the Act. In this view of the matter, we hold against the assessee in respect of the first question and answer the same in the affirmative. The second question of law, that is posed for consideration is whether, the Tribunal was right in holding that section 40(c) of the Act has to be applied to the managing director's remuneration, inclusive of the bonus payments though such payments related to the assessment years 1972-73 and 1973-74. On this issue all the officers below including the Tribunal came to the conclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the approval by the Central Government. There is also the decision of the Supreme Court in Nonsuch Tea Estate Ltd. v. CIT [1975] 98 ITR 189. The apex court held that the liability to pay the managing director in such circumstances arises only when the Government conveyed its approval and not prior to that. Therefore, the accounting of the bonus payments for the year ended March 31, 1974, was rightly taken note of by the Income-tax Officer for holding that the assessee had exceeded the limit prescribed under section 40(c) of the Act. In this view of the matter, the third question of law raised in Tax Case No.709 of 1982 is also answered in the affirmative and against the assessee. In fine, all the questions of law raised in Tax Case No ..... X X X X Extracts X X X X X X X X Extracts X X X X
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