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TMI Blog2008 (4) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... P. N. Monga with Manu Monga for the appellants. Ms. Prem Lata Bansal for the respondent. JUDGMENT The judgment of the court was delivered by MADAN B. LOKUR J. - The following five questions of law have been referred for our opinion under section 256(1) of the Income-tax Act, 1961: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the disallowance of 50 per cent. of the assessee's share of the expenditure on maintenance of Kamla retreat. 2. On the facts and in the circumstances of the case, whether the learned Income-tax Appellate Tribunal was correct in law in holding that only 50 per cent. of depreciation is admissible in respect of the assets installed in the premises of JKCM and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion No. 4. 5. At the relevant time, section 40(c) of the Income-tax Act was as follows "40. Amounts not deductible.- Notwithstanding anything to the contrary in sections 30 to 39, the following amounts shall not be deducted in computing the income chargeable under the head 'Profits and gains of business or profession,—…… (c) in the case of any company— (i) Any expenditure which results directly or indirectly in the provision of any remuneration or benefit or amenity to a director or to a person who has a substantial interest in the company or to a relative of the director or of such person, as the case may be. (ii) Any expenditure or allowance in respect of any assets of the company used by any person referred to in sub-clause (i) eit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s: Rs. (i) Shri Gopal Krishan Singhania 1,62,500 (ii) Shri Bhim Singh 50,000 (iii) Shri C. L. Jhunjhunwala 50,000 (iv) Shri V. B. L. Mathur 50,000 (v) Shri L. N. Ladha 50,000 (vi) Shri Shripat Singhania 1,62,500 (vii) Shri Sohanlal Singhania 2,75,000 (viii) Shri Hari Shanker Singhania 1,00,000 (ix) Shri Gaur Hari Singhania 3,87,500 (x) Shri Vijaypat Singhania 1,62,500 (xi) Dr. R.C. Vaish 50,000 7. The total of amount of commission comes to about Rs. 15 lakhs and according to the Assessing Officer, wherever payment was made over and above the ceiling amount of Rs. 72,000 it was required to be disallowed. Therefore, the disallowance was to the extent of Rs. 8,18,000. 8. What is required to be considered is whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the quantum of commission is to be determined at the discretion of the board of directors of the assessee. The commission that may be paid in terms of the special resolution is up to a maximum of 3 per cent. of the net profits of the company. In other words, there is no fixed commission that is paid to any of the directors and the amount of commission may vary depending upon the decision of the board. What are the factors that the board is required to take into consideration have not been spelt out but we have to proceed on the basis of the decision of the board as it is presuming that the commission payable to the directors is determined on the basis of services rendered by them or some similar requirement. 11. It is under these circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the percentage of commission have not been spelt out in the special resolution. So long as the percentage is not fixed and is variable, it cannot partake of the nature of salary and, therefore cannot partake of the nature of remuneration which, according to learned counsel for the Revenue, is similar to salary. 15. Learned counsel for the Revenue has also referred to Hira Lall and Sons v. CIT [1991] 190 ITR 408 (Delhi) but again that decision would not be of any assistance to her because the commission paid to the employee in that case was a fixed 2 per cent. of the sales made by the assessee. 16. While arriving at our decision, we have taken into consideration several situations that may arise such as where the percentage of commission ..... X X X X Extracts X X X X X X X X Extracts X X X X
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