9911796707
TMI Blog1993 (2) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... llowable under section 5(j)) of the Agricultural Income-tax Act, 1950 ?" The respondent is the Revenue. The matter arises under the Agricultural Income-tax Act. We are concerned with the assessment year 1984-85. The assessee which is a company claimed that it is entitled to deduction of Rs. 1,20,000 paid towards the remuneration of its directors. The assessing authority, by order dated July 30, 1985, held that the amount claimed is fabulous and is not in any way connected with deriving of agricultural income. It was a clear act of diversion of income from the company and so cannot be allowed. The assessee filed an appeal from the aforesaid order of assessment before the Deputy Commissioner (Appeals) and took a specific objection that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d their remuneration would have been higher. So, on an ad hoc basis, he allowed 50 per cent. of the amount claimed, i.e., Rs. 60,000, and allowed the same as deduction by way of salaries and allowances. The Revenue as well as the assessee filed appeals before the Agricultural Income-tax Appellate Tribunal. Both the appeals were heard and disposed of by the Tribunal by a common order dated June 1, 1988. The Tribunal observed, in paragraph 5 of its order, thus : " ... Five of the nine directors of the company during the relevant year were ladies. Auditors' report appended to the annual accounts does not show the details of payment made to each director. A copy of the resolution said to have been adopted authorising payment of salary to di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal was in error in holding that section 314 of the Companies Act ever applied to this case at all. On this basis, the Tribunal was in error in holding that since there was no special resolution, the payment of salary could not be allowed as a deduction. It was further argued that, at no time, was the assessee required to produce the resolution of the company authorising payment of salary to the directors. The disallowance was made on an ad hoc basis and without applying the mind. So, the order of the Appellate Tribunal is erroneous in law. It should have been held that the payment made to the directors is an allowable deduction under section 5(j) of the Agricultural Income-tax Act, 1950. On the other hand, learned Government Pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the directors was not produced. Based on the above factual basis, the deduction claimed was disallowed. The Appellate Tribunal did not disallow the deduction solely on the basis of section 314 of the Companies Act. Since the Appellate Tribunal was satisfied that the plea put forward was not proved and the payments were influenced by personal considerations, the disallowance was proper. Having considered the rival pleas put forward before us, we are of the view that the decision of the Tribunal is justified in law. The Appellate Tribunal noticed the plea taken before the first appellate authority and also before it. The Appellate Tribunal entered the following findings of fact in paragraph 5 of its order : ". . . . Five of the nine direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed before the Registrar of Companies was also not brought to the notice of the authorities. This fact was not put forward before the assessing authority in any of the communications addressed by the assessee to the assessing authority. What is more, the director of the company who appeared and argued the matter before the first appellate authority did not produce any relevant material, even the minutes book of the extraordinary general meeting or a copy of the resolution or application to the Registrar of Companies. It is because the assessee specifically put forward the plea that the remuneration was paid to the directors as authorised by the company in a special resolution and it was not proved, the authorities declined to grant the relie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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