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TMI Blog1996 (8) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... ng director in Libyan dinars for services rendered in Libya and as approved by the Central Government is covered by section 40(c)(i) of the Income-tax Act, 1961, and the rupee equivalent of the payment of remuneration in foreign currency in excess of Rs. 72,000 is to be disallowed ? (2) Whether the Income-tax Appellate Tribunal was right in having held that the rupee equivalent of the remuneration paid to the managing director in Libyan dinars and incorporated in the accounts of the company is to be disallowed to the extent it is in excess of Rs. 72,000 even if there is no finding that such remuneration was excessive ? (3) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that the expenses are strictly related to the construction work undertaken in Libya, and, therefore, not of the nature described in section 35B(1)(b)(i) or (iv) or (viii). In appeal the Commissioner of Income-tax (Appeals) fixed the correct amount of disallowance of salary at Rs. 5,60,919 instead of Rs. 3,93,430 fixed by the officer. He further confirmed the action of the Income-tax Officer with regard to the claim under section 35B. In further appeal by the assessee, the Tribunal allowed the claim of the assessee only in respect of the office rent and rejected the other claims under section 35B. As far as the payment of salary to the managing director was concerned, the view taken by the assessing authority had been confirmed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly or indirectly in the provision of any remuneration or benefit or amenity to a director or to a person who has a substantial interest in the company or to a relative of the director or of such person, as the case may be; (ii) any expenditure or allowance in respect of any assets of the company used by any person referred to in sub-clause (i) either wholly or partly for his own purposes or benefit, if in the opinion of the Income-tax Officer any such expenditure or allowance as is mentioned in sub-clauses (i) and (ii) is excessive or unreasonable having regard to the legitimate business needs of the company and the benefit derived by or accruing to it therefrom, so, however, that the deduction in respect of the aggregate of such expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel for the assessee reiterated the contention that inasmuch as the Income-tax Officer has not recorded a finding that the salary paid to the managing director is excessive or unreasonable, the whole of the expenditure claimed is allowable. This contention was negatived by the Tribunal. We also do not find our way to countenance it. A similar argument was advanced on behalf of an assessee before the Calcutta High Court in Bilaspur Spinning Mills and Industries Ltd. v. CIT [1982] 135 ITR 496. After interpreting the relevant provisions and taking note of the Notes on Clauses of the relevant Finance Bill, the Division Bench of the said court ultimately held : " In that background of the matter, it appears to us that there were two conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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