1977 (2) TMI 51

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....terms of that agreement, it was found that for the assessment years 1972-73 and 1973-74, the said Shri. S. Vaideeswaran had been paid a sum of Rs. 25,942 and Rs. 26,728 respectively. The ITO was of the opinion that the commission paid was highly excessive, as it worked out to 25% of the gross profit and 45% of the net profit and was even greater than the share of any of the partners of the firm. He also found that Shri Vaideeswaran was the brother-in-law of one of the partners Shri R.K. Swami. He, therefore, invoked the provisions of s. 40A(2) of the Act and thought it fit to allow only a sum of Rs. 2,400 per year as the adequate remuneration for the employee and added back a sum of Rs. 19,642 for the assessment year 1972-73 and Rs. 20,428 ....

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....se of the business. It was submitted that even though the assessee has been paying the amounts for several years, the fact that the person concerned was related to one of the partners and the fact that the services rendered by him could not merit such high remuneration should lead us to infer that the payment was for extra commercial consideration. The assessee opposed this contention by pointing out that the remuneration paid has been progressively increasing only because of the fixed rate linked to the turnover and that if the turnover should fall, the remuneration would also fall. It was thus submitted that the remuneration paid cannot be considered to be excessive merely because it fluctuated according to the prospects of the business w....