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TMI Blog1973 (9) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 1963-64, the following questions were suggested : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in upholding the disallowance of the sum of Rs. 49,316 under section 40(c) of the Income-tax Act, 1961, being remuneration paid to the directors of the assessee-company, in accordance with the terms of its articles of association? (2) Whether, on the facts and in the circumstances of the case, and having regard to the legitimate business needs of the company and the benefit derived by or accruing to it therefrom, there was any evidence before the Tribunal to hold that the remuneration paid to the directors was excessive or unreasonable, within the meaning of section 40(c) of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following four directors: (a) Smt. L.J. Pamnani, (b) Smt. K.L. Pamnani, (c) Smt. K.P. Pamnani, (d) Seth Bal Chand. The remunerations paid during the assessment year 1963-64 to the first three were Rs. 17,450, Rs. 17,450 and Rs. 23,260 respectively and for 1964-65 were Rs. 18,000, Rs. 18,000 and Rs. 24,000, respectively. Smt. L.J. Pamnani, the first director, is the wife and the other two, the daughters-in-law of the chairman. The petitioner-company claimed the said remunerations as deductions from its profits. The Income-tax Officer felt convinced that the rendering of service by the three ladies was proved but found no justification for the quantum of remuneration claimed. He reduced the same to Rs. 1,000 per month f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Appellate Assistant Commissioner, although opportunity was given for the purpose. He concluded that none of the other functions were proved to have been performed by the ladies. For attending board meetings, they were paid separate sitting fees. The allowance of Rs. 1,000 per month as remuneration to each of them was considered unreasonable and excessive. He allowed Rs. 300 per month to Smt. L.J. Pamnani and Rs.250 per month each to the other two. The income of the petitioner was accordingly directed to be enhanced. The Appellate Tribunal in second appeal was of the view that an allowance under section 40(c) of the Income-tax Act could be claimed if it could be shown to the satisfaction of the authorities that the payment was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of remuneration has to be determined by placing oneself in the position of a director in-charge of the management. The Tribunal had found that the property of the ladies had been mortgaged and this was a service which had been rendered by them, but which had not been taken into consideration by the Appellate Assistant Commissioner or by the Tribunal. Mr. Sharma further contended that it was the opinion of the Income-tax Officer which was to prevail and not the assessment made by the Appellate Assistant Commissioner or the Tribunal. Mr. B. N. Kirpal, the learned counsel for the revenue, on the other hand, submitted that the Tribunal having come to a definite finding of fact, no question arose for making any reference to this court. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no justification in allowing any remuneration more than that allowed by the Appellate Assistant Commissioner. This is a finding of fact and does not involve the applicability of any legal principles. The Supreme Court in Nund Samont Co. P. Ltd. v. Commissioner of Income-tax was of the view that it was for the taxpayer to establish by evidence that the particular allowance was justifiable. It was held that in the absence of evidence relating to the duties of the directors, the services rendered by them, the manner in which the profits were enhanced by reason of their special aptitude or qualifications, the legitimate, business needs and the benefit derived by the appellant in consequence of such services rendered, the finding recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X
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