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TMI Blog1993 (9) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... aries. Messrs. Killick Nixon Ltd. held more than 20% of the equity shares of the assessee-company during those previous years, and, as such, it was a person having substantial interest in the company within the meaning of section 2(32) of the Act. The above amount was claimed as deduction by the assessee in computation of its income for all the three assessment years. The claim was allowed by the Income-tax Officer. However, later the Commissioner of Income-tax, in exercise of his powers of suo motu revision under section 263 of the said Act, set aside the order of the Income-tax Officer so far as it related to the allowance of the above claim and directed the Income-tax Officer to restrict the claim on that account to Rs. 72,000 for each year as contemplated by section 40(c) of the Act. Before the Commissioner it was contended by the assessee that section 40(c) was applicable only to cases where the recipient of the remuneration was an individual and not where it is a corporate body. This contention of the assessee did not find favour with the Commissioner who was of the opinion that the expression "a person who has a substantial interest in the company" in section 40(c) cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) 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 expenditure and allowance in respect of any one person referred to in sub-clause (i) shall,in no case, exceed (A) where such expenditure or allowance relates to a period exceeding eleven months comprised in the previous year, the amount of seventy-two thousand rupees ; (B) where such expenditure or allowance relates to a period not exceeding eleven months comprised in the previous year, an amount calculated at the rate of six thousand rupees for each month or part thereof comprised in that period : Provided that in a case where such person is also an employee of the company for any period comprised in the previous year, expenditure of the nature referred to in clauses (i), (ii), (iii) and (iv) of the second proviso to clause (a) of sub-section (5) of section 40A shall not be taken into account for the purposes of sub-clause (A) or sub-clause (B), as the case may be, Explanation.-The provisions of this clause shall apply notwithstanding that any amount not to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause the Legislature means no more and no less than what it says. It would not be right to refuse to place on the language of the statute the plain and natural meaning which it must bear on the ground that it produces a consequence which could not have been intended by the Legislature. It is also well settled law that where a word is defined in the statute and that word is used in a provision to which that definition is applicable, the effect is that wherever the word defined is used in that provision, that definition of the word gets substituted. On a reading of section 40(c) of the Act in the light of the above principles with the definition of "person" in section 2(31) of the Act, we find it difficult to accept the contention of learned counsel for the assessee that the application of section 40(c) is restricted to "individuals" and it does not apply to other categories of persons specified in section 2(31) of the Act. Much emphasis was laid in the course of the arguments on the expression "a relative of the directors of such person" appearing in section 40(c) to show that the person referred to in the earlier part must be capable of having a relative and as a company is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to cover all categories of persons specified in section 2(31) of the Act including individuals, companies, etc. Reliance was also placed on the proviso to section 40(c) of the Act which deals with cases where the person mentioned in clause (c) of section 40 is an employee of the company. We do not think that this proviso in any way supports the contention of the assessee. The proviso is to carve out something from the main provision. It does not restrict the operation of the main provision which is clear and unambiguous. The proviso will apply only to a person who is an employee and included in the main provision of section 40(c). The proviso will apply only to those employees falling under section 40(c) who meet the requirements thereof. In that view of the matter, we are of the clear opinion that "person" referred to in section 40(c) is not confined to "individual"-it means and includes all categories of persons, including a company, specified in section 2(31) of the Act. Learned counsel for the assessee also contended that in the event we decide the question referred to us against the assessee, we should also examine whether the payment of Rs. 2,00,000 was made by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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