9911796707
TMI Blog1983 (2) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... ried on by the assessee, it was practically not feasible to maintain day- to day stock register. It was also submitted that the ITO has not brought any material on record to justify the rejection of the book result. Having been satisfied with the submissions of the assessee, the AAC deleted Rs. 3,000 from the total income of the assessee. 5. The ld. representative for the department strongly relied on the order of the ITO and submitted that the order of the AAC on this point should be reversed. The ld. counsel for the assessee on the other hand invited our attention to page 16 of his paper book containing comparative chart for and from the asst. yrs. 1971-72 to 1979-80 and pointed out that except for the year under appeal all long the assessee's book result were accepted by the ITO even when the rate of gross profit disclosed in some years was lower than what was disclosed in the year under appeal. It was therefore urged that we should up hold the order of the AAC. 6. On due consideration of the rival submissions of the parties as well as keeping in mind the case history of the assessee we do not find any justification to interfere with the order of the AAC on this point. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) The illness of the assessee himself necessitated these payments to be made to his son Shri Manohar Daryanani who ostensibly looks after his business. (b) Shri Manohar Daryanani has advanced loans to the assessee amounting to Rs. 54,249. No interest statedly has been paid to Shri Manohar Daryanani. (c) Such payments of the type of profits in lieu of salary would cause more impetus to the business than a mere fixed salary. (d) Such payments had been accepted in the past and therefore, according to the assessee should be allowed. A close look at the above four main stands of reasoning forwarded by the assessee would real that he has nowhere tried to interpret the basic creteria of judging the payments which are covered within the meaning of section 40A(2). The point at question is whether such expenditure incurred by the assessee is excessive or unreasonable having regard to the fair market value of services or facilities for which the payment is made or whether such expenditure caters to the legitimate needs of the business of the assessee. This is the essence of applicability of section 40A(2). It is immaterial as to whether any agreement has been drawn up for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments to others and hence it would be proper to conclude that even Shri Manohar Daryanani does not discharge exclusive managerial responsibility. I will disallow the entire payments made to Shri Manohar Daryanani as being within the meaning of section 40A(2)." In appeal before the AAC, the assessee reiterated the submissions, which were made before the ITO. The AAC's attention was drawn to the increase in sales from the first year, in which the assessee's son was taken as an employee to the asst. yr. 1978-79 with a view to impress upon her that it was solely due to the son's effort that the business increased from Rs. 1.51 lakhs to Rs. 4.09 lakhs. It was also submitted on behalf of the assessee that since be was losing eye-sight and in fact, became blind, he had no alternative but to depend more and more on his son, who was looking after the business. It was also stated before the AAC that apart from his son, there was only one another employee who was getting Rs. 300 per month for looking after the sales in the shop. While his son was not only looking after the shop but also visiting places like Bombay, Ahmedabad etc. for making purchases, and also looking after the account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. It is an admitted fact that due to his eye-trouble, the assessee was not in a position to look after the business. Therefore, the assessee had to rely upon his employees as has been brought on record a part from his son, the assessee had one more employee who was getting salary of Rs. 300 per month. However, this employee was simply looking after the sales at the shop. On the other hand, the assessee's son was looking after the entire show and was able to push the sales to Rs. 4,08,745 on which the assessee earned net profit of Rs. 32,330. Further the deduction allowed to the assessee u/s 80U of the Act clearly shows that the assessee was physically handicapped to carry on the business, without the help of his employees, more particularly his son. The assessee's son was also advanced substantial money without interest. It is also worthwhile noting here that perhaps the revenue would not have objected to his son getting more than 40% of the profit had he been taken up as a partner by the assessee. On the total appreciation of the facts and circumstances obtaining in the present case, we are clearly of the view that but for the higher rate of remuneration paid to the son, perhaps ..... X X X X Extracts X X X X X X X X Extracts X X X X
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