Directors' commission and excessiveness under tax law turns chiefly on factual assessment of business needs and benefit derived.

Commission paid to directors is assessed by reference to the company's legitimate business needs and the benefit derived from the services rendered. On the facts found by the Tribunal, the directors were experienced, held responsible positions, and the commission was supported by business expansion and increased profits. The Court treated the question whether the payment was excessive or unreasonable under section 40(c)(i) as primarily one of fact for the Tribunal, and its reasoned finding would not be disturbed absent perversity or mala fides. The disallowance was therefore not warranted.

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Issues: Whether commission paid by the assessee-company to its directors was excessive or unreasonable so as to attract disallowance under section 40(c)(i) of the Income-tax Act, 1961, and whether the reference questions raised any question of law.

Analysis: The payment of commission to directors had to be examined with reference to the legitimate business needs of the company and the benefit derived therefrom. On the facts found by the Tribunal, the directors were experienced, held responsible positions, and the commission was justified by the expansion of the business and profits. The Court held that the issue whether the expenditure was excessive or unreasonable was primarily a question of fact for the Tribunal as the final fact-finding authority, and no perversity or mala fides was shown in its finding.

Conclusion: The commission was not shown to be excessive or unreasonable, and the disallowance under section 40(c)(i) was not warranted. The questions were answered in the negative and in favour of the assessee.

Ratio Decidendi: Whether remuneration or commission to directors is excessive or unreasonable having regard to the company's business needs and the benefit derived is ordinarily a question of fact for the Tribunal, and its reasoned finding will not be interfered with unless shown to be perverse.

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