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TMI Blog1980 (6) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... . 89 of 1978, which relates to the assessment year 1973-74, and the questions referred in I.T.R. No. 90 of 1978, which relates to the assessment year 1974-75, are Assessment year 1973-74 " I Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in deleting the addition of Rs. 18,000 made by the Income-tax Officer for the assessment year 1973-74 under sec. 40(c) of the Income-tax Act, 1961 ? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that the assesseecompany has, by giving the qualifications of its managing director, Sri P. K. Korah, discharged its burden of proof in establishing that under sec. 40(c) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or accrued to it therefrom? 3. Whether, on the facts and in the circumstances of the case, the findings of the Income-tax Appellate Tribunal that, in the absence of any comparative case being given by the Income-tax Officer, it is impossible for the Tribunal to judge whether the payment of the salary to the managing director of the company is excessive and that the Income-tax Officer has not been able to substantiate the disallowance, are in disregard of the evidence on record and are perverse, unreasonable and wrong ? " The assessee is a private limited company incorporated on August 31, 1970. One Sri Korah was the managing director of the company during the relevant years. He along with his wife is holding 74 shares out of the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal took note of the fact that the managing director and his wife together owned 74 shares out of the total of 150 shares of the company, and that there was every possibility that the remuneration fixed " may not be the market value ". Though the Tribunal commenced the discussion of the question in para. 3 of its order by rightly stating that the onus to prove that the remuneration paid to the managing director was commensurate with the market value of his services was on the assessee, it was of opinion that the assessee had discharged the said onus by merely giving the qualifications of Mr. Korah. We may extract the relevant portion of the reasoning of the Tribunal contained in para. 3 of it order: " The qualifications of Mr. Korah a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am Goodacre and Sons (India) Ltd., Alleppey, on a salary of Rs. 1,500 per mensem. No material whatever was placed by the assessee before the ITO to show that the remuneration paid by the assessee-company to the managing director was reasonable having regard to the market value of similar services in the shipping trade of any person possessing the aforementioned qualifications and that having regard to the legitimate business needs of the company and the benefits derived by it or accruing to it from the services of the managing director, the remuneration paid to him was not excessive. In such state of evidence the Tribunal was, in our opinion, fairly wrong in its view that the assessee had discharged the onus of proof and that the burden was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are unable to agree with counsel for the assessee that even if the taxpayer does not produce any evidence in support of the claim for allowance, the Income-tax Officer must independently collect evidence and decide that the allowance claimed is excessive or unreasonable having regard to the legitimate business needs of the assessee before the power under section 10(4A) may be exercised. " Applying the aforesaid dictum to the present case, we have no hesitation to hold that the Tribunal was not justified in interfering with the conclusion of facts by the ITO and confirmed by the AAC that the remuneration paid to the managing director of the assessee-company was excessive and that a sum of Rs. 18,000 had to be disallowed under s. 40(c) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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