9911796707
TMI Blog1978 (11) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year 1967-68, from Calcutta Art Studio, a firm in which there were several partners. Shri P. K. Biswas, Shri S. M. Biswas and Shri Biswajit Biswas were some of the partners of the aforesaid firm and they became the employees of the assessee-company. The AAC in the appeal filed by the assessee-company has allowed the salary paid to them but we are not directly concerned with it in this reference. The senior partner of the aforesaid firm was Shri Surendra Nath Biswas. He is a qualified artist and an expert in litho-printing. He became the managing director of the assessee-company on a monthly salary of Rs. 1,500. Shri Biswanath Biswas was also a partner of the aforesaid firm. He is an expert in off-set printing and has va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the AAC reads, inter alia, as follows : " It is thus obvious that in the first two years, the appellant has shown negligible amounts of profit and in the third year, it has shown a huge amount of loss. This means that the appellant-company has not been benefited to any marked extent as a result of the services of the managing director. This thing is further obvious from the fact that the gross profit in the assessment year 1969-70 has gone down to 19.5% as against the profit of 22.7% shown in the first year. After considering the trading results and business needs of the appellant-company I feel that the remuneration of Rs. 18,000 paid by it to the managing director was certainly excessive and unreasonable. After taking into account th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve. In my opinion, a remuneration of Rs. 7,200 will be reasonable for this person. After allowing remuneration of Rs. 7,200, there will be a disallowance of Rs. 4,800 in each of the years under appeal. This will mean a relief of Rs. 1,200 in each of the first two years and Rs. 200 in the third year." The assessee-company then filed a further appeal regarding the disallowed amounts, but the Appellate Tribunal dismissed it and sustained the order of the AAC in the following terms : " In our opinion, however, the Appellate Assistant Commissioner has allowed the reasonable amount of remuneration to each of the directors after considering all the facts and circumstances. The assessee has not brought sufficient material on record to justify t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in consequence of the services rendered by the managing director and the deputy managing director. In the absence of any such evidence, the finding recorded by the Income-tax Officer and confirmed by the Appellate Assistant Commissioner and the Tribunal must be accepted. We 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." Mr. Sengupta, therefore, argues that no evidence was adduced by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities in disallowing the balance of his salary should not have compared his salary with the salary of the aforesaid three employees of the assessee-company for they are not comparable units at all and that Shri Biswanath Biswas was not an employee but a director of the company. It was not even argued by the departmental representative before the appellate authorities that the service of Shri Surendra Nath Biswas as an artist and the service of Biswanath Biswas as an expert in offset printing were not the legitimate business needs of the assessee- company. We also do not find any such finding in the orders of the appellate authorities. On the other hand, while disallowing a part of the salary of Shri Surendra Nath Biswas, the AAC without s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uses the expression " the benefit derived by or accruing to it therefrom ". The word " benefit " here means benefit derived by the company or accruing to it from the service of the persons specified in the section. Further, profit or loss depends on various factors. There may be a huge profit in one year and similarly there may be a huge loss in another year. Merely because there is a huge profit, the entire remuneration or salary paid to the persons specified in the section cannot be allowed as a matter of course. Similarly, no part of the remuneration or salary can be disallowed merely on the ground that the company has suffered a huge loss in the accounting year. It is not the profit or loss but the benefit derived by the company or ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
