Business deduction for managerial remuneration allowed despite company law non-compliance, with later recovery taxed separately.

Remuneration paid to a general manager for services actually rendered was deductible as business expenditure, even though the appointment and payment were not authorised under the Companies Act. The non-compliance with company law and the fact that the amount was recoverable under that statute did not prevent deduction because the Income-tax Act is a self-contained code for determining tax treatment. Any later recovery is dealt with separately under the tax statute in the year of recovery. The payment was therefore admissible as a business deduction.

---

---

Issues: Whether remuneration paid to a general manager was deductible as business expenditure despite non-compliance with the Companies Act provisions governing his appointment and remuneration.

Analysis: The payment was made for services actually rendered as general manager. Although the appointment and remuneration were not authorised under section 360 of the Companies Act, 1956 and the amount was recoverable under section 363 of that Act, the Income-tax Act operates as a self-contained code for determining deductibility. The existence of a statutory right of recovery and a trust obligation under company law did not negate the fact that the amount had been actually expended by the company. When such sums are later recovered, the tax statute separately provides for their treatment as income in the year of recovery.

Conclusion: The remuneration was admissible as deduction; the answer was in the affirmative and in favour of the assessee.

Ratio Decidendi: For deduction under the business expenditure provision, actual payment for services rendered is not disallowed merely because the payment contravenes company law, where the income-tax statute itself contains the mechanism for taxing any later recovery.

---