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TMI Blog1978 (8) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... d by Rs. 10,000. It was also found that the business showed a negligible profit of Rs. 81. The ITO held that such increase of the directors' remuneration was unreasonable and disallowed the same to the extent of Rs. 6,600. Being aggrieved, the assessee preferred an appeal from the said order. It was contended before, the AAC that the ITO had ignored the contribution by the principal of the assessee, a foreign company, of amounts aggregating to Rs. 73,000 as against Rs. 30,000 received in the immediately preceding year. It was also pointed out that there had been an increase to the extent of Rs. 43,000 in the volume of business. The AAC, following its decision in the immediately preceding year, directed the ITO to allow increment at the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the Tribunal upheld the disallowance of Rs. 4,800 in the year under appeal. On an application of the assessee under s. 256(2) of the I.T. Act, 1961, the Tribunal has drawn up a statement of case and has referred the following question for the opinion of this court as a question of law arising out of its order : " Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in confirming the disallowance of Rs. 4,800 out of the remuneration of Rs. 16,200 paid to Sri S. N. Singh ? " The learned counsel for the assessee has contended at the hearing that the, Tribunal was in patent error in ignoring the facts which came into existence in the year in question and which were not in existence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessee to prove what specific service, had been rendered by S. N. Singh. (f) Though remuneration paid to the lady director had not been disturbed yet it was found that remueration had been granted to the directors on extra-commercial consideration. On perusal of the said two orders, it appears to us that in the order with which we are concerned, there were new facts in existence which were not properly considered or appreciated by the Tribunal. Further, we are unable to understand why the remuneration of one of the directors was disallowed in part whereas the remuneration of the other two directors were allowed in full. The position in law is now well settled. We may refer to the following decisions : (a) Nund Samont Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f their responsibility of properly managing the affairs of the company. Among the directors again there may be a division of labour for the efficient administration of the affairs of the company and there may also be managing directors with larger powers and greater responsibility in the matter of management of the affairs of the company. The benefit of their services derived by or accruing to the company cannot be judged by considering the number of hours of work put in or the kind of physical or hard labour done by them. The benefit has to be considered from the point of view of the company as a prudent man of business by applying one's mind to all the relevant facts and circumstances. " It appears to us that the Tribunal did not apply ..... X X X X Extracts X X X X X X X X Extracts X X X X
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