TaxTMI 
TaxTMI 
TaxTMI 
1982 (9) TMI 75
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.... quarters given to the managing director and the remuneration given to another whole-time director and for the present we will refer to relevant facts about the disallowances made by the ITO in respect of the aforementioned items. At an extraordinary meeting of the shareholders held on 4-10-1969 the assessee-company fixed the remuneration of the managing director at Rs. 3,000 per month and of the whole-time director at Rs. 2,500 per month with effect from 18-7-1969 in modification of previous agreements dated 22-6-1967 in the case of managing director and dated 18-8-1968 in the case of whole-time director. This resolution had the effect of increasing the remuneration of two directors and, therefore, the approval of the Company Law Board was....
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....respect of the short payment of the earlier accounting period ended on 30-6-1970. It was the claim of the assessee's authorised representative that the provision was made in the accounting year ended on 30-6-1971 in accordance with some common practice all over the world and the country when the remuneration is subject to the permission of Central Government and that a liability which was known at the time of finalisation of accounts was required to be provided for in the accounts as per requirements of the Act. It was contended that what the Central Government sanctioned was merely a ratification of a decision taken earlier by the company in its annual general meeting and the date of sanction, therefore, had no relevance to the year of cla....
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....5. We have carefully considered the rival submissions and are of the opinion that the case of the assessee squarely falls within the ratio of the Supreme Court decision in the case of Nonsuch Tea and that the ITO had rightly disallowed the three amounts of Rs. 22,750, and Rs. 2,320 relating to the managing director and Rs. 17,000 out of remuneration of the whole-time director. The Supreme Court has clearly held that in view of section 326 which contained an absolute prohibition against the appointment or reappointment of a managing agent before approval of the Central Government was obtained, the assessee-company's liability to pay the remuneration of the managing agents arose only when the Government conveyed its approval by its letter dat....
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....ny, or a private company which is a subsidiary of a public company, any provision relating to the remuneration of any director including a managing or whole-time director, or an amendment thereof, which purports to increase or has the effect of increasing, whether directly or indirectly, the amount thereof, whether that provision be contained in the company's memorandum or articles, or in an agreement entered into by it, or in any resolution passed by the company in general meeting or by its Board of Directors, shall not have any effect unless approved by the Central Government ; and the amendment shall become void if, and insofar as, it is disapproved by that Government : Provided that the approval of the Central Government shall not be r....