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TMI Blog1987 (6) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Income-tax Officer ? " The facts in a nutshell which are necessary for answering this question may usefully be stated. The assessee Shri Ved Prakash Patel, in the instant case, is a Hindu undivided family consisting of Ved Prakash, his wife and a minor son. The year of assessment in the instant case is 1971-72 and the accounting year is the year ending Diwali 1970. Earlier, Ved Prakash was a partner of a firm in which Maganlal Dajibhai had six annas' share, Ved Prakash had a six annas' share, whereas Maganlal Lallubhai had a four annas' share. Consequent upon the death of Maganlal Dajibhai, on April 18, 1967, there was a change in the constitution of the firm whereby Ved Prakash (HUF) had 60% share and Maganlal Lallubhai had 40% sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the view that on this sum of Rs. 65,000, commission at the rate of 12% per annum would be adequate. Calculating on this basis, he allowed deduction of a sum of Rs. 7,800 and the balance of Rs. 46,466 was disallowed and added to the income of the assessee. Aggrieved by the order of the Income-tax Officer, the assessee preferred an appeal which was allowed by the Appellate Assistant Commissioner. On a second appeal filed by the Revenue, the Income-tax Appellate Tribunal, however, reversed the order of the Appellate Assistant Commissioner and restored that of the Income-tax Officer. While doing so, the Tribunal, inter alia, recorded a finding that the amount of royalty paid under the agreement for the year 1971-72 virtually was equal to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was called for by this court under section 256(2) of the Act. It was urged by counsel for the assessee that the payment of royalty to the legatees of Maganlal Dajibhai was made inasmuch as they had a paramount title and the payment so made to them was clearly liable to be deducted from the income of the assessee. Suffice it to say that, so far as this submission is concerned, on the facts and in the circumstances of the case, it is not possible to hold that the legatees of Maganlal Dajibhai had any paramount title to the royalty in the sense in which the term "paramount title " is known to law. As already seen above, the payment of royalty was to be made by the assessee on the basis of an agreement voluntarily entered into by it with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the facts of the instant case. In that case, under will, certain executors were to act as managers of the property on behalf of the beneficiaries who owned it. The executors were treated as an association of individuals for purposes of income-tax. The beneficiaries under the will could not go behind the will and the obligations in pursuance of the directions made by the testator under the will to make certain payments as allowances to various persons. Even these sums which the beneficiaries had to pay to various persons were sought to be assessed as income in the bands of the executors. On these facts, it was held that the executors were managers of the property on behalf of the beneficiaries who owned it and they could not be treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion reads as hereunder : " 40A. 2(a) Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of this sub-section, and the Income-tax Officer is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assesse or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction: Provided that the provisions of this sub-section shall not apply in the case of an assessee being a compan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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