9911796707
TMI Blog1974 (8) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... s out of the assessment for assessment years 1960-61 and 1961-62. The assessee is a private limited company. The shareholders of the company are Mr. J. H. Somerville, the managing director of the company, his wife and son. The company originally employed Mr. J.D. Somerville on September 8, 1951, as sales manager of the company at a monthly salary of Rs. 1,200 and an increment of Rs. 300 was given with effect from January 1, 1952. Further increment of salary was given with effect from April 1, 1953. Later on, he was promoted as director with effect from July 6, 1956, at a salary of Rs. 2,000 per month. The assessee-company claimed the aforesaid amount as deduction before the ITO. The ITO, taking the earlier assessments, which were confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ille is being paid remuneration at Rs. 2,000 p.m. As discussed in the earlier assessment order and as confirmed in appeal he is allowed salary of Rs. 1,050 p.m. (inclusive of increment of Rs. 50). The balance amount of Rs. 11,400 is disallowed under section 10(4)(a). ... ... ... ... Rs. 11,400." As mentioned hereinbefore, there was an appeal before the AAC. The AAC in the previous year had observed as follows: " The Income-tax Officer has made the disallowance for the same reasons as in the earlier assessments which, an appeal, to the Tribunal have been restricted only to 25% of the claim. Following the Tribunal's decision I hold that Rs. 6,000 may be disallowed in each of the years in question. In view of this, I hold that there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny amount disallowed under this sub-section is included in the total income of any person referred to in clause (a). " It is similar to s. 40(c)(i) and (ii) of the I.T. Act, 1961. Before us counsel for the assesses urged two contentions. He submitted that in the case of salary which was paid to a director no question of not allowing the same under s. 10(4A) could arise because according to counsel for the assessee the section dealt with an allowance in respect of an expenditure which resulted directly or indirectly in any remuneration. Therefore, anything which was paid as remuneration to a director could not be termed as something which resulted in the remuneration payable to a director. It was, secondly, urged that on a proper construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pable that one must read it here, either because of its collocation with 'other annual payments' or for common sense, as meaning annual interest only, because it is only for that kind of interest that the Act has allowed deduction and retention of tax by the payer. Then there comes the third heading, described as 'Declaration of the amount of interest, annuities, or other annual payments, to be made out of the property or profits assessed on the claimant .......' The collocation of interest with annuities and other annual payments is the same as in the preceding heading, and as a straightforward question of construction alone I think that any reader would naturally suppose that the word 'interest' was being used in the same sense in each of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be one which was allowable under s. 10(2). Having regard to the requirements of the section, in our opinion, in this case, the consideration upon which s. 10(4A) would apply would not apply to the facts of this case. Counsel for the revenue contended before us that it was not disallowed on the ground of s. 10(4A) but on the ground that it was not allowable under s. 10(2)(xv). We are unable to accept this position. From the order of the ITO, it appears that s. 10(2)(xv) had not been considered at all. Therefore, it would not be proper to allow the revenue to examine this aspect of the matter afresh when the revenue has not disallowed the expenditure on the ground that the expenditure in question was not wholly and exclusively necessa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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