1998 (2) TMI 60

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....d in a company, no such appointment shall be continued by the company after the period of six months from the date of commencement of the amending Act, unless such appointment had been approved by the company in the general meeting, and by the Central Government before the expiry of that period. The assessee-company had appointed one Narayanan Chettiar as its chairman prior to the coming into force of the amending Act but had failed to apply within the six months period to the Central Government for securing its approval of such appointment and consequently, approval was not granted by the Central Government, and therefore he became disentitled to continue as chairman after the period of six months from February 1, 1975. On an applicatio....

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....been refused by the Central Government and, therefore, it could not be allowed as business expenditure. Counsel invited our attention to the decision of the Andhra Pradesh High Court, in the case of CIT v. Maddi Venkatratnam and Co. (P.) Ltd. [1983] 144 ITR 373, and the decision of the apex court in the case of Maddi Venkataraman and Co. (P.) Ltd. v. CIT [1998] 229 ITR 534. The decision of this court holding that the payment made contrary to the provision of the Companies Act is nevertheless deductible as business expenditure in the case of CIT v. Sree Rajendra Mills Ltd. [1974] 93 ITR 122, had been dissented from by the Andhra Pradesh High Court in the decision reported in CIT v. Maddi Venkataratnam and Co. (P.) Ltd. [1983] 144 ITR 373. ....

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.... of the amending Act. Such continuance impliedly includes the payment of remuneration to the person so allowed to continue. It is only continuation after the expiry of six months period that has been declared illegal, unless such continuation was approved by the shareholders and the Central Government. The refusal by the Central Government to grant approval for continuation beyond the six months period, on the ground that the application for such approval, had not been made within the six month period, clearly does not have the effect of rendering the continuation in office by Narayanan Chettiar, as chairman of the company, during this six month period from the date of amending Act came into force, illegal. The amount paid to him during tha....