1989 (1) TMI 46

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....unting to Rs. 42,476 and Rs. 48,498, respectively. During the assessment proceedings, the Income-tax Officer found that one of the partners of Bharat Sales Corporation was a director of the assessee-company and other partners were related to the shareholders of the assessee-company. In view of this, he applied section 40(c) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), and for the first year disallowed the commission to the extent of Rs. 22,694 and for the next year disallowed Rs. 29,000. On the assessee's appeal, the Appellate Assistant Commissioner restricted the disallowance for the first year to Rs. 11,984 and maintained the disallowance for the subsequent year. The order of the Appellate Assistant Commissioner was....

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....sion of any remuneration or benefit or amenity to a director or to a person who has a substantial interest in the company or to a relative of the director or of such person, as the case may be,. . ." A reading of the aforesaid provisions would show that this provision gets attracted only when any payment is made by way of remuneration or benefit or amenity to a director or to a person who has a substantial interest in the company or to a relative of the director or of such person, as the case may be, and not otherwise. Here, the partnership concern, namely, Bharat Sales Corporation, which is a separate legal entity was appointed as the sole selling agent of the assessee-company. It is true that in the partnership concern one of the partn....