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TMI Blog1989 (2) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and in the circumstances of the case and on correct interpretation of the provisions of section 40(c)(i) of the Income-tax Act, 1961, the Appellate Tribunal was right in upholding the disallowance of As. 1,13,000 being the excess over the limit of Rs. 72,000 laid down in the aforesaid provisions of the Act ?" The facts of the case as found by the Tribunal have been stated as under : "The assessee is a company and the relevant assessment year is 1972-73. The corresponding accounting period ended on March 31, 1972. The assessee regularly maintained accounts on the mercantile system. In the course of the relevant assessment proceedings, the Income-tax Officer noticed that the assessee-company paid commission to Sri M. L. Jalan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not necessary that only remuneration would come for consideration under section 40(c). As a matter of fact, any expenditure which results directly or indirectly in the provision of any remuneration or benefit or amenity to the concerned person would fall for consideration under section 40(c). In this case, no doubt, Shri M. L. Jalan was benefited by the expenditure incurred by the assessee-company. Therefore, the limit of allowance of Rs. 72,000 would immediately be applicable and the authorities below were right in so applying it to the instant expenditure. In this context, we do not find any reason to interfere with the Appellate Assistant Commissioner's decision in the matter." The relevant portion of section 40, sub-clause (c), is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay the loan, his personal assets and properties may be attached and sold in execution of any decree that may be passed in respect of that loan. Therefore, by giving the guarantee, M. L. Jalan has exposed himself to a liability. It is for his undertaking that liability that remuneration is being paid. This cannot be described as a benefit. If anything, he has taken upon himself the liability for which he is being remunerated. In the case, of Suessen Textile Bearings Ltd. v. Union of India [1984] 55 Comp Cas 492 (Delhi), the nature of guarantee commission paid to a director was examined by the Delhi High Court in the context of the provision of section 309 of the Companies Act, 1956. There, it was observed that when a director of a compan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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