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1971 (6) TMI 7 - HC - Income TaxThe amount of remuneration of directors and the manner of distribution thereof are both provided in the articles of association of the company. Payment of remuneration by virtue of any provision contained in the articles does not undoubtedly oust the jurisdiction of the Income-tax Officer under section 10(4A) and, by itself, in the absence of other relevant materials, may not sufficiently justify an amount paid. In view, however, of the fact that the total amount paid to the directors on account of remuneration and commission in the instant case is not unreasonable or excessive and is justified, the manner of distribution of the said total amount amongst the directors on the basis of the articles which constitute a valid agreement between the members themselves who also happen to be the directors and between them and the company, results in the smooth and efficient working of the company and avoids all kinds of possible hitches amongst them. As the payment of the total amount of remuneration inclusive of commission to the directors is justified in the facts of the instant case, the payment to the Rani of a larger sum in the matter of distribution of the total amount by agreement between the parties cannot be considered to be unjustified, particularly as such payment results in smooth working of the company on the basis of the articles.
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