Reasonableness of family salary payments treated as a factual question, with Tribunal's restriction upheld on the record

Salary paid to the assessee's sons was found excessive on the facts, as they were graduates, one had previously received a much lower salary, and the business continued despite the assessee's earlier paralytic attack. The court held that reasonableness of salary is essentially a question of fact, and the Tribunal, as final fact-finding authority, had not recorded any perverse finding. The Tribunal was therefore justified in comparing the claimed remuneration with a lower benchmark and restricting it to a reasonable amount. The reference was answered in favour of the Revenue and against the assessee.

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Issues: Whether the Tribunal was justified in determining the reasonableness of salary paid to the assessee's sons by comparing it with the salary of a peon.

Analysis: The assessee claimed deduction for salary paid to his two sons who were employed in the business. The Court found that the sons were graduates, one had received only a much lower salary in the preceding year, and the assessee had continued the business even after his earlier paralytic attack. On the facts, the salary claimed was held to be excessive and without justification. The Court also held that the reasonableness of salary is essentially a question of fact and that the Tribunal, as the final fact-finding authority, had not recorded a perverse finding warranting interference.

Conclusion: The Tribunal was justified in restricting the salary as reasonable, and the reference was answered in favour of the Revenue and against the assessee.

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