TaxTMI 
TaxTMI 
1962 (2) TMI 129
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.... to his son, Sankaran, who was employed in the business. The salary and bonus payments claimed as deduction by the assessee for the two assessment years were as follows: Assessment years Salary Bonus 1953-54 Rs. 12000 per year Rs. 3000 per year 1954-55 do do Rs. 3500 per year The Additional Income Tax Officer, Tinnevelly allowed as deduction salary, for both the years, of Rs. 4500 a year and allowed Rs. 900 as bonus for the year 1953-54 and Rs. 1400 as bonus for 1954-55 as proper deduction. The rest of the assessee's claim for deduction was disallowed. The assessee preferred an appeal to the Appellate Assistant Commissioner, Tuticorin. The Appellate authority e....
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....by the Tribunal, it is not now necessary for us to express any opinion on the question whether the direction to take further evidence in the matter was properly given in a proceeding under Section 66 of the Act. 4. The business of the assessee was during the relevant period carried on at Kallidaikurichi and at Pollachi. Formerly the business was owned by a firm of two partners, the assessee and his brother, Mani Iyer. Between the years 1929 and 1949 the assessee's brother Mani Iyer was managing the business at Pollachi. Mani Iyer died sometime in December 1949. Thereafter the assessee seems to have become the sole owner of the business, sankaran, the son of the assessee was born in 1929 and he passed the first year Intermediate exami....
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....onditions prescribed under Section 10(2)(x) of the Act. That provision reads; "Any sum paid to an employee as bonus or commission for services rendered where such sum would not have been payable to him as profits or dividends if it had not been paid as bonus or commission; provided that the amount of the bonus or commission is of a reasonable amount with reference to (a) the pay of the employee and the conditions of this service; (b) the profits of the business, profession or vocation for the year in question and (c) the general practice in similar business, professions or vocations." 6. We shall first deal with the question as to whether the claim of the assessee to deduct Rs. 12,000 per annum, salary paid to Sankaran, falls wi....
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....as would fall within the language of Section 10(2)(XV) of the Act. 7. Payment of salary in excess of the needs of the business cannot be justified as a proper revenue charge on the Income. The taxing authorities have a difficult task to perform when they have to determine whether a salary payment, in whole or in part, is expended wholly and exclusively for the business. Does the payment represent a fair measure of remuneration for services rendered; is it within the limits of commercial prudence of a reasonable business man conducting a business of that magnitude; does the capacity, ability and skill of the employee deserve the salary paid;--these are a few pertinent questions, which if answered may lead to a satisfactory solution of the....
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....d for the purpose of the business. Once that test is satisfied, namely, correlation of the business purpose with the expenditure, the department is not concerned with the question what in its opinion would have been the proper expenditure." 9. What are the facts in this case? A boy just out of the College is said to be in independent charge of a business in the place of a deceased partner. He is paid a salary of Rs. 1000 a month and bonus of about 3 to 4 months salary. The annual income of the business when it was run by the deceased partner Was roughly Rs. 55062 in 1947; Rs. 34460 in 1948, Rs. 43605 in 1949. After Sankaran, the son of the assessee, took charge the annual earnings were Rs. 20878 in 1951, Rs. 32360 in 1952; Rs. 31979 in 1....