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TMI Blog1976 (3) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... e appointed the joint managing directors of the assessee with effect from the 1st October, 1958, for a term of 5 years. They were sanctioned remuneration of Rs. 3,000 per month each and in addition were provided with free furnished accommodation, which were valued it Rs. 4,500 each. It is found that Mahabir Prasad Jatia at the relevant time suffered from a serious physical handicap in that he had an almost totally impaired vision. In the assessment, the ITO disallowed the entire remuneration paid to Mahabir Prasad under s. 10(4A) of the I.T. Act, 1922, and also added back a sum of Rs. 4,500 as vaule of the rent-free furnished accommodation provided for Mahabir Prasad. Ile held that by reason of the said physical handicap Mahabir Prasad could not have rendered any service to the assessee. From the assessment all appeal was preferred by the assessee to the AAC who confirmed the assessment of the ITO. A further appeal was preferred by the assessee to the Tribunal. The Tribunal considered the evidence on record and came to the conclusion that Mahabir Prasad was actively engaged in looking after the affairs of the assesse even though under a handicap. The Tribunal found that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en for the assessee to challenge the facts found and conclusions arrived at by the Tribunal inasmuch as the question referred was a mixed question of law and fact. When such question was before the court, a separate question on the ground of perversity, he submitted, need not be raised. In support of his contentions Mr. Dutt relied on several decisions of the Supreme Court, namely, Eastern Investments Ltd. v. CIT [1951] 20 ITR 1, CIT v. Chari and Chari Ltd. [1965] 57 ITR 400, Swadeshi Cotton Mills Co. Ltd. v. CIT (No. 1) [1967] 63 ITR 57 and CIT v. S. P. Jain [1973] 87 ITR 370. The decision in the case of CIT v. S. P. Jain reported in [1973] 87 ITR 370 (SC), cited by Mr. Dutt, may be noted in particular. In the case before the Supreme Court, the assessee had sought to raise before the Tribunal the following question : " Whether, on the facts and in the circumstances of the case, the findings of the Tribunal that a sum of Rs. 10,80,000 paid for the purpose of the shares was not the assessee's own income was a perverse finding having regard to the evidence on record ? " The Tribunal did not refer this question. On the assessee's application under s. 66(2) the High Court also did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases the findings arrived at are vitiated." Accordingly, the Supreme Court held that the Tribunal had failed to take into account relevant materials on record in arriving at its findings, had acted on inadmissible evidence and had based its conclusions on conjectures, surmises and wrong facts. The facts in the case before us can be distinguished from the special facts which were before the Supreme Court in the above case. In the instant case, the assessee at no stage sought to impugn the findings of the Tribunal on facts. " The High Court when directing the Tribunal to refer the question which is before us bad no question on facts in view. In view of the specific questions raised by the assessee in the instant case, it appears that the assessee is precluded from agitating the question of perversity or to otherwise challenge the facts found by the Tribunal. Law has been definitely and repeatedly laid down by the Supreme Court in India Cements Ltd. v. CIT'[1966] 60 ITR 52, Hooghly Trust (P) Ltd. v. CIT [1969] 73 ITR 685 ; and ... [1971] 82 ITR 533 (sic). In any event, it cannot be held that in the instant case the Tribunal acted merely on conjecture or surmise. Evidence in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied on a number of decisions. These may be discussed in their chronological order. The first case cited was the Newtone Studios Ltd. v. CIT [1955] 28 ITR 378 (Mad), for the proposition that under s. 10(2)(xv) the taxing authority did not have any power or jurisdiction to determine the reasonableness of the amount fixed and paid by the assessee. This decision has no application as in the instant case we are concerned not with s. 10(2)(xv) but with s. 10(4A), which is an exception to the earlier section. The next was a decision of this court in the case of Rajasthan Investment Ltd. v. CIT [ 1 965] 57 ITR 194 (Cal), cited for the proposition that while allowing or disallowing remuneration under s. 10(2)(xv) the Tribunal should not be guided by a subjective test but by objective facts. This decision was on s. 10(2)(xv) and is of little assistance in the instant case. Two other decisions cited by Mr. Dutt, namely, CIT v. Walchand and Co. Private Ltd. [1967] 65 ITR 381 (SC) and, J. K. Woollen Manufacturers v. CIT [1969] 72 ITR 612 (SC), both on s. 10(2)(xv), need not be discussed any further. Lastly, Mr. Dutt cited a decision of this court in the case of CIT v. Edward Keventer (Pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omes within the mischief of the said provisions. The ITO must, however, consider the entire position dispassionately and objectively and from the view-point of a prudent businessman...The opinion of the ITO as to the reasonableness or otherwise of the amount spent must not be arbitrary and is not to be the subjective and prejudiced opinion of an officer interested in collecting more revenue. The opinion as to reasonableness or otherwise of the amount spent must be formed, having regard to the legitimate, bussiness needs of the company and the benefit derived by the company or accruing to the companv from the said sum extended. The said s. 10(4A) itself, while conferring the necessary powers on the ITO, places two limitations in the matter of exercise of the power and the said sections enjoin the ITO to take into consideration in exercising the power, (1) the legitimate business needs of the company, and (2) the benefit derived by or accruing to the company in forming any opinion as to the reasonableness or otherwise of the amount spent. The legitimate business needs of the company must be judged from the view-point of the company itself and must be viewed from the point of view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision is only subject to review by the Tribunal. The legislature having specially empowered the ITO to find out the reasonableness or otherwise of an allowance claimed, giving certain criteria and that officer having considered those criteria and decided the allowability of the deduction one way or the other, and the same has been confirmed by the Tribunal, this court cannot interfere unless the decision of the ITO or the Tribunal is unreasonable or capricious. In this case, it is not possible for us to say that the inference drawn by the Tribunal from the basic facts is unreasonable or perverse so as to call for interference by this court on reference. " The next decision cited by Mr. Sen was J. B. Bottling Co. v. CIT [1975] 98 ITR 512 (Delhi). In this case, the question mooted before the Delhi High Court was whether the Tribunal was justified in law in upholding certain disallowances being remuneration paid to the directors of the company and whether there was any evidence before the Tribunal to hold that the remuneration paid to the directors was excessive or unreasonable within the meanings of s. 40(c) of the I.T. Act, 1961. It may be rioted that s. 40(c) of the I.T. Act, 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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