TaxTMI 
TaxTMI 
TaxTMI 
1980 (7) TMI 272
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....story. By clause 4, the company would pay as remuneration ₹ 2 lakhs. In the Schedule attached to the agreement the conditions of employment are given. Clause G of the Schedule says, as an artiste, Manoj Kumar would render his service to the best of his ability. Clause 7 says that all rights in photographs, records, etc., would vest with the company. Clause 8 gives the terms and conditions expected of the service as director of the picture : and clause 9 gives the terms and conditions as author of the story. A similar agreement was entered into on 5-1-1972 in respect of another film production named "Shor". The terms and conditions for playing the leading role, directing and writing the story are identical with the earlier agreement. He was to be paid a consolidated amount of ₹ 3 lakhs. The company closes their accounts on 30th June. For the year ended 30-6-1971, ₹ 1,09,500 was debited as payment to Manoj Kumar and for the year ended 30-6-1973, the debit was ₹ 2,41,300 for the respective assessment years 1972-73 and 1974-75, the company claimed and the ITO allowed these expenses as a deduction. The Commissioner held that the assessment orders were e....
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....e point before us in not res integra as far as Tribunal decisions are concerned. This point has come up in IT Appeal No. 3172 (Bom.) of 1977-78 before Bench "B" of the Tribunal and by their order dated 22-11-1978, the Bench had held that on a plain reading of the clause, it covers all types of remuneration payable to a director. The Bench had considered the argument of Shri Mehta that remuneration contemplated under section 40(c) applies only to the type of remuneration for services as a director and they had rejected it. In another case, of Pai Paper & Allied Industries Ltd. IT Appeal No. 3680 (Bom.) of 1977-78 dated 29-6-1979, the identical issue came before the Tribunal. One of us was a party to that order, where the arguments of the assessee for restrictive interpretation of section 40(c) were rejected. 6. We should follow the same reasonings given in their two orders normally. But, we find, subsequent to these two decisions, a ruling of the Karnataka High Court has been made available which, to some extent, is at divergence with the Tribunal decisions, in T.T.(P.) Ltd. v. ITO [1980] 121 ITR 551 the ambits of sections 40(c)and 40A(2) have been discussed. At page 567,....
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....rocessing of goods ; (vi) packing and forwarding ; (vii) advertising ; (viii) collection of market information ; (ix) depositing money with the principal without any interest ; (x) insurance of goods and several other functions. Without the services of a competent selling agent it may not be possible to a big manufacturer to push his goods in the market. We do not think that, in these circumstances, payment made to such a selling agent can be treated as an expenditure referred to in section 40(c) of the Act. It is also relevant to bear in mind section 40(c) is a successor to section 10(4A) of the 1922 Act. But section 40A was introduced in the year 1968 in the Act apparently for the purpose of preventing the abuse of excessive or unreasonable payments being made by assessees to persons referred to therein in lieu of goods, services and facilities. If the payments represent a fair market value then there is no limitation on the total amount payable during any period. We are of the view that expenditure incurred by way of commission paid to a selling agent who acts as an independent entrepreneur with an independent organisation which is not subject to the control and supervision of t....
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....en by him before such intimation." Again clause 5 says : "The company shall provide all character period of special costumes required for the performance of the artiste's part including all modern costumes of a kind not normally or reasonably used by him in his private capacity. All clothing so provided shall be and remain the property of the company. The company shall compensate the artiste for any damages to his clothing sustained while such clothing is being used at the request of the company for the purpose of the film." These two clauses make it clear that his agreement is as an artiste. Clause 3 shows that he is at liberty to give his artiste services to other producers also. That is why a reference is made to his "other commitments". Clause 5 also indicates that clothings would belong to the company, a clause unnecessary in cases of service contracts. In this connection, we would refer to the English case of Household v. Grimshaw 34 TC 366. In that case, the assessee, an author, entered into an agreement with a film company which provided that for a minimum period of twelve weeks in each of the three successive years the assessee should rend....