1970 (5) TMI 5

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....l net profits subject to the minimum of Rs. 5,000. In the year of account ending June 30, 1958, the assessee debited an amount of Rs. 66,106 paid to the managing director and the deputy managing director. For the assessment year 1959-60 the Income-tax Officer while computing the taxable income in exercise of his power under section 10(4A) of the Income-tax Act allowed only Rs. 54,670 as remuneration for the managing director and the deputy managing director, and disallowed the balance of Rs. 11,436. He was of the view that the allowance paid to the two directors was excessive or unreasonable having regard to the legitimate business needs of the company and the benefit derived by or accruing to it therefrom. The Appellate Assistant Commissio....

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....the High Court, fell to be determined by this court. For reasons which we have stated in Civil Appeal No. 376 of 1967 (India Machinery Stores (P.) Ltd. v. Commissioner of Income-tax), we are of the view that the certificate is defective. Mr. Chagla appearing on behalf of the assessee has offered to file a petition for special leave in this case. We have accepted the undertaking given by the advocate on record to file a special leave petition. We have heard counsel on the merits of the appeal. Section 10(4A) of the Indian Income-tax Act, which was added by the Finance Act of 1956, with effect from April 1, 1956, provides, in so far as it is material: " Nothing in sub-section (2) shall, in the computation of the profits and gains of ....

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....ssessment year 1957-58, the Tribunal allowed the claim in full: in respect of the year 1958-59, the Tribunal allowed an amount of Rs. 48,000 as against the claim for Rs. 74,190. The assessment orders for the years 1957-58 and 1958-59, are not before the court. In his order relating to the assessment year 1959-60, the Income-tax Officer adopted the reasons recorded in his previous order relating to the earlier years, and held that the remuneration paid to the directors was excessive or unreasonable having regard to the legitimate business needs of the company and the benefit derived by and accruing to it therefrom. The Appellate Assistant Commissioner agreed with that view. He rejected the contention of the company that the managing director....