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TMI Blog1983 (2) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... sistant Controller proceeding on the basis that s. 17 of the Act is applicable, determined the, value of one share at Rs. 10.60. Accordingly, the value of 12,000 shares was taken at Rs. 1,27,200. He found that the said company in which the deceased had shares is a controlled company within Explanation (a) to s. 17(4)(iii). The total income of the company as per books for the three years prior to the date of death had been worked out as under : Rs. 31-3-1961 15,592 31-3-1962 15,242 31-3-1963 1,260 --------------- 32,094 --------------- The Assistant Controller also found that the deceased was in receipt of salary and bonus along with the other directors, that for purposes of r. 11(8) of the Controlled Companies Rules, a sum of Rs. 9,000 per year per director would be reasonable as salary and bonus and that the reasonable remuneration for the four directors worked out to 4 X 9,000 X 3 = 1,08,000 as against a total claim of Rs. 1,63,800 under the head " Salary and bonus Thus, a sum of Rs. 55,800 was held to be excessive remuneration. The details of the excessive remuneration in respect of each of the four directors were found as under: Rs. 1. Shri S. V. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce: 10,560 x 5,34,889/87,894 = 64,264 Total amount includible under s. 17(2) 64,264 Amount included by the Asst. Controller 73,775 Excess included 9,511 He thus granted the accountable person relief in a sum of Rs. 9,511. The accountable person went on appeal to the Income-tax Appellate Tribunal against the order of the Appellate Controller. He, however, accepted the net value of the assets fixed at Rs. 5,34,889 and the total profits at Rs. 87,894 (Rs. 55,800 Plus Rs. 32,094) worked out by the authorities below, but contended that the amount includible under s. 17(2) was only Rs. 12,435. The contention of the accountable person was that the Appellate Controller erred in taking the excess remuneration of the deceased alone into account without taking into account the entire excess remuneration paid to all the directors and that the entire excess remuneration of Rs. 55,800 would have to be distributed as dividend in which case the deceased would have received Rs. 11,160 as found by the Assistant Controller. The accountable person relied on the decision in Mamie Bhagwan Das Ahuja's case [1968] 70 ITR 439, as supporting his stand. He also put forward the plea that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said years: Provided that (a) where, in any of the said accounting years, the company sustained a loss, the amount of that loss shall be deducted in ascertaining the said aggregate net income of the company ; (b) where the company came into existence in the last year but one, or in the last of the said accounting years, the references in this sub-section to the said accounting years shall be construed as references to the last two, or, as the case may be, the last of those years." Section 17 brings to charge the transfers made by the deceased to controlled company and the measure of liability depend on the benefit derived by the deceased from the controlled company. The said section states that the taxable portion of the assets of the company shall be determined according to sub-s. (2). Sub-s. (2) says that the extent to which the assets of the company are to be deemed to be included tinder sub--s. (1) shall be the proportion ascertained by comparing the aggregate amount of the benefits accruing to the deceased from the company in the last three accounting years with the aggregate amount of the net income of the company for the said years. Thus the dutiable slice of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcess remuneration were to be distributed as dividend and, therefore, the entire excess remuneration of all the directors should have been taken into account and not only the excess remuneration received by the deceased. On a due consideration of the matter, we are of the view that the excess remuneration received by the deceased alone should be taken into account for the purpose of rule 11(9) and not the excess remuneration received by all the directors. The deceased in this case is found to have received excess remuneration of Rs. 13,200 and the excess remuneration received by all the directors has been determined as Rs. 55,800. The said sum of Rs. 55,800 paid as excess remuneration to all the directors had already gone to increase the income of the company. No doubt if it had been distributed as dividend, the deceased by virtue of his shareholding would have received Rs. 11,160. But if the total receipts by the deceased alone is to be taken into account for determining his share benefit and non-share benefit and as such the excess remuneration received by the deceased alone is taken into account as the amount which would have been distributed as dividend, then the deceased wou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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