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TMI Blog1978 (1) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... olved some common questions of law the Tribunal made a consolidated reference. Two questions have been referred to us, one of which is common to all the four assessment years and the other to the assessment years 1960-61 and 1961-62. The first question, which is common for all the four assessment years, runs as follows : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in disallowing the sums of Rs. 36,000 in each of the assessment years 1959-60 and 1960-61 and Rs. 35,700 and Rs. 29,700 in the assessment years 1961-62 and 1962-63, respectively, from out of the salaries paid to the director employees of the company ?" It is not necessary to set out the facts in regard to this question at grea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee had been considered by the Tribunal in the earlier assessment year also and that no new material whatsoever had been brought on record. The Tribunal, therefore, confirmed the disallowance in 1959-60 and following this, in the subsequent three assessment years as well. Hence, this reference. We have heard the present reference along with I.T.R. No. 55 of 1969 which was the reference made to this court in respect of the assessment year 1958-59 under s. 66(2) of the Act. In our judgment in I.T.R. No. 55 of 1969, we have discussed the matter in detail and we have pointed out that the Tribunal's decision for that year was vitiated by the non-consideration of some of the material evidence placed before it by the assessee. We have, accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur decision is " Whether the sums of Rs. 2,490 and Rs. 8,196 representing the expenditure incurred by the assessee-company in procuring proxies from some shareholders of the managed company was an admissible deduction under s. 10(2)(xv) of the I.T. Act, 1922 ? "The assessee incurred an expenditure of Rs. 2,490 in the calendar year 1959 (accounting year relevant for the assessment year 1960-61), for procuring proxies from various shareholders for a meeting of the shareholders of DCM (the managed company) to be held on November 12, 1959. Similarly, in the calender year 1960 (relevant for the assessment year 1961-62), the assessee incurred an expenditure of Rs. 8,196 for obtaining proxies from several shareholders of DCM for a meeting to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting, was a fresh appointment for a fresh term. In our opinion, this conclusion of the Tribunal proceeds on a misapprehension as to the true legal effect of the transaction in question. It is not in dispute that the assessee was originally appointed as the managing agent of DCM for a period of 15 years (vide statement of case in I.T.R. No. 55/69) from 1952. In the normal course, the managing agency would have subsisted till January, 1967. But in the meanwhile the Companies Act, 1956, was enacted and this introduced a number of prohibitions and restrictions regarding the appointment of managing agents of companies. We are here concerned with the provisions of s. 330 of the said Act which was in the following terms : Where a company has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agency. It is of significance that the fresh term of appointment does not extend beyond the term of the original appointment. All that the company has achieved by the passing of the resolution was to retain the managing agency intact for five more years beyond August 15, 1960, and save it from extinction on that date. In these circumstances, the expenditure incurred by the assessee was laid out, not with the object of acquiring a new source of income but only to preserve the continuance, as far as was permissible in accordance with law, of the existing source of income, namely, the managing agency of the DCM. We are, therefore, of opinion that, as a result of the expenditure incurred in 1959, the assessee did not acquire, or intend to acqui ..... X X X X Extracts X X X X X X X X Extracts X X X X
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