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TMI Blog1993 (10) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... onth to Shri H. V. Navani, working director of the company, as excessive and unreasonable in terms of section 40(c) of the Income-tax Act, 1961 ?" For the assessment years 1976-77 to 1978-79: "Whether the Tribunal was justified in holding the rent of the flat at Delhi as expenses on maintenance of guest house, under the facts and circumstances of the case ?" The brief facts of the case are that Shri Navani was working as a sales executive with Messrs. Jaipur Metals and Electricals Ltd., and with effect from August 9, 1972, he was appointed as consultant by the assessee and he was provided free residential accommodation at Delhi. On August 14, 1972, a resolution was passed by the assessee appointing Shri Navani, as full time working di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the legitimate business needs of the company, the figures of sales and purchases at Delhi and one of the directors of the assessee-company being permanently stationed at Delhi and was looking after the day-to-day business matters of the company was also taken into consideration. The Tribunal held looking to the facts and circumstances that the Income-tax Officer was right in observing that payment made to Shri Navani was excessive and unreasonable and the legitimate business needs of the assessee do not warrant the payment that was made by the assessee to Shri Navani. In respect of the expenditure of Rs. 2,500, Rs. 6,000 and Rs. 2,500 for the assessment years 1976-77, 1977-78 and 1978-79 in respect of the guest house, it was obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erived by or accruing to it therefrom. The provisions of section 40(c) confer jurisdiction on the Income-tax Officer to satisfy himself that the remuneration paid is excessive or unreasonable having regard to the legitimate business needs of the company and the benefit derived by or accruing to it therefrom. In order to come to this conclusion, it has been examined from the point of view of commercial expediency. In the present matter, the provisions of section 40(c) were invoked and it is not a case where it could be said that the provisions of section 40(c) were not applicable. The reasonableness or otherwise of the quantum of amount could be examined by the Income-tax Officer dispassionately and objectively and not in a biased or prejudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there being no evidence on the part of the assessee to rebut such letter, we hold that the authorities below took the right view that a guest house was being maintained by the assessee". The Income-tax Appellate Tribunal has proceeded only on the basis of the letter given by the assessee and has not given any finding as to what was the nature of the expenditure incurred, whether it pertains to the payment of rent or other expenditure. According to the statement of the assessee, the expenditure was in respect of payment of rent. If the payment has been made on rent, then the expenditure could not be considered to be an expenditure for maintenance of the guest house, which is its liability under section 37. Accordingly, we are of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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