Commission disallowance, amalgamation expenses, and motor car depreciation were tested under settled income-tax principles.

Commission paid to a managing director was treated as a perquisite falling within the disallowance rule under section 40(c), so that claim was rejected. Legal and professional expenses incurred for amalgamation of a sister concern were treated as revenue expenditure, so the deduction was allowed. For motor car expenses, personal user was not inferred merely because directors or employees used the vehicle in a company context, and the related depreciation claim was maintainable, so the disallowance was not sustained.

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Issues: (i) Whether commission paid to the managing director was liable to be treated as a perquisite for the purposes of disallowance under section 40(c) of the Income-tax Act, 1961; (ii) Whether legal and professional expenses incurred in connection with amalgamation were revenue expenditure or capital expenditure; (iii) Whether a sum out of motor car expenses was disallowable on account of personal and non-business use; (iv) Whether the assessee was entitled to the depreciation claimed in respect of the motor car.

Issue (i): Whether commission paid to the managing director was liable to be treated as a perquisite for the purposes of disallowance under section 40(c) of the Income-tax Act, 1961.

Analysis: The question was governed by the binding view already taken in earlier authority, which treated such commission as falling within the scope relevant for disallowance under section 40(c).

Conclusion: The issue was answered against the assessee and in favour of the Revenue.

Issue (ii): Whether legal and professional expenses incurred in connection with amalgamation were revenue expenditure or capital expenditure.

Analysis: The expenditure was incurred in relation to amalgamation of a sister concern with the assessee-company. The controlling precedent treated such legal and professional expenses as deductible revenue expenditure.

Conclusion: The issue was answered in favour of the assessee and against the Revenue.

Issue (iii): Whether a sum out of motor car expenses was disallowable on account of personal and non-business use, and whether the assessee was entitled to the depreciation claimed in respect of the motor car.

Analysis: The court applied the settled principle that, in the case of a company, use of the vehicle by directors or employees does not by itself justify a disallowance on the footing of personal user, and the depreciation claim was accordingly maintainable.

Conclusion: Both issues were answered in favour of the assessee and against the Revenue.

Final Conclusion: The reference was disposed of with mixed answers, the first question going against the assessee and the remaining questions being decided in its favour.

Ratio Decidendi: Questions under the Income-tax Act must be answered by applying the governing precedent on the nature of the expenditure or allowance, and in the case of a company, disallowance for personal use of a motor car is not warranted merely because directors or employees use the vehicle.

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