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TMI Blog1997 (3) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case, the Tribunal was justified in holding that the provisions of section 40(c) of the Income-tax Act, 1961, are applicable in the case of the appellant-company in so far as it concerned the payment of Rs. 1,52,368 made by it to M/s Larsen and Toubro Ltd. for having rendered services through a committee of directors ? " In Income-tax Reference No. 118 of 1990, the following question has been referred to this court for opinion : " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the provisions of section 40(c) of the Income-tax Act, 1961, are applicable in the case of the appellant-company in so far as it concerned the payment of Rs. 2,05,527 made by it to Larse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the facts of the instant case because the payments had been made by the assessee to Larsen and Toubro Ltd., which is a holding company of the assessee-company. The case of the assessee before the Tribunal was that section 40(c) was applicable only to payments made to individuals and not to a limited company. This contention of the assessee was rejected by the Tribunal. The Tribunal observed that section 40(c) was applicable to any expenditure which resulted directly or indirectly in the provisions of any remuneration or benefit or amenity to a director or a person who. has a substantial interest in the company. The Tribunal held that the expression " a person who has a substantial interest in the company " having been defined in sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Dr. Balasubramanian, learned counsel for the Revenue, submitted that the controversy sought to be raised was not a facet of the controversy arising out of the questions referred to this court. According to him, it was a new controversy now sought to be raised for the first time which was not even supported by any factual finding of the Tribunal. He also submitted that in any event, on the face of the uncontroverted facts of this case, the ratio of the above decisions of the Supreme Court has no application to this case. According to Dr. Balasubramanian, this is not a case where the payments were made by the assessee-company to Larsen and Toubro Ltd. for any services rendered or for parting with any valuable right. The payment in this case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to the facts of the present case. In that case, the controversy was about commission paid to the directors, in addition to their salary, at a percentage on the sales effected by them. It was in that context that the Supreme Court held that payment made to the directors by way of commission on sales effected by them did not fall within the purview of section 40(c) of the Act. The ratio of the above decision cannot apply to the payments made for the services rendered in managing the affairs of the assessee-company. Similarly, the ratio of the decision of the Supreme Court in Bharat Beedi Works P. Ltd. v. CIT [1993] 201 ITR 1063 is also not applicable to the facts of the present case. In that case, the controversy was regarding payments m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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