1968 (8) TMI 34

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....ng on 30 June, 1958, relevant for the assessment year, 1959-60 ? " On that point, the revenue as well as the Tribunal have held against the assessee. The assessee is a public limited company incorporated in 1924. Messrs. Harrisons and Crossfield Ltd. were its managing agents from the commencement, but there was no written agreement as to the terms of the managing agency. Prior to April 1, 1956, the remuneration to the managing agents was fixed at certain rates. For the period April 1, 1956, to June 30, 1956, the assessee credited a sum of Rs. 9,320 to the managing agents with the recital " by remuneration in accordance with the terms of the proposed new agreement payable for the period April 1, 1956, to June 30, 1956 ". The debit was in ....

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.... the Government of India gave its approval on September 2, 1957, and that being the case, in the year in which the approval was given the liability having arisen to pay the remuneration according to the new terms, it was entitled to deduction of the total sum of Rs. 97,188. The Tribunal, which agreed with the revenue at different stages, held that the liability to pay the sum of Rs. 97,188 was an ascertained liability when the debits in the remuneration account of the managing agency were made. If the assessee failed to claim deduction for the appropriate period, the responsibility was entirely its own and it could not properly be allowed to claim deduction of the same in the assessment year in question. It has been strenuously argued....

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....effect to by making debit entries in the remuneration account then and there. It is true that at the time the debit entries were made the approval of the Central Government had not come. But when it came actually later, it gave legal effect to the debit entries not from the date of the approval, but from, as we said, April 1, 1956. That being the case, the refusal of the deduction, in our opinion, was right. Our attention has been invited to certain provisions of the Companies Act, and it is argued that if the payment of remuneration had been made prior to the date of approval in September, 1957, that would have been illegal. We have carefully considered the provisions of the Companies Act, in particular sections 326, 328 and 330, as als....