TMI Blog1978 (4) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1,00,777 to Shri M.M. Thapar by way of salary and profit commission was excessive or unreasonable so as to justify the disallowance of a portion thereof ? " The facts found and/or admitted in these proceedings are shortly as follows : Messrs. Karam Chand Thapar Bros. (P.) Ltd., Calcutta, the assessee, is a private limited company. In the assessment year 1961-62, the relevant previous year being the one ended on the 31st March, 1961, Rs. 1,00,777 paid to M. M. Thapar, son of late Karamchand Thapar, by way of remuneration consisting of salary, allowance and share of profits, came up for consideration during the assessment. M. M. Thapar had worked as a director of the assessee in the said assessment year. The ITO held that M. M. Thapar w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance made by the ITO. Being aggrieved, the assessee preferred a further appeal to the ITA Tribunal. It was contended on behalf of the assessee in the appeal that the qualifications of M. M. Thapar were sufficiently high to justify the remuneration paid to him. It was also contended that no special post had been created for M. M. Thapar but he was appointed as a director in the usual course. It was contended further that remuneration and profits were being paid to all directors in the same proportion. It was brought to the notice of the Tribunal that at the time of appointment of M. M. Thapar, the two mills, namely, Jagatjit Cotton Mills and Sri Gopal Paper Mills, were in a stage of expansion and after his appointment substantial exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1960, and had been re-employed in the relevant year for a period of one year. The Tribunal held that the contentions of the revenue as to the lack of qualification of M.M. Thapar were without any substance. Following a decision of this court in CIT v. Edward Keventer (Private) Ltd. [1972] 86 ITR 370 (Cal) and applying the principles laid down herein the Tribunal held that from the point of view of a prudent businessman the remuneration and commission paid to M. M. Thapar were reasonable and justified and no disallowance therefrom was called for. The appeal of the assessee was allowed. At the hearing, Mr. B. L. Pal, learned counsel for the revenue, reiterated the submissions of the revenue that the qualifications of M. M. Thapar were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cations, the legitimate business needs of the assessee and the benefit derived by or accruing to the assessee in consequence of the services rendered by the managing director and the deputy managing director. In the absence of any such evidence, the finding recorded by the ITO and confirmed by the AAC and the Tribunal must be accepted. " Inspired by the above observations Mr. Pal contended that in every case, it was necessary for the assessee to give evidence on each of the items enumerated, namely : (a) Duties of the directors concerned. (b) Services rendered by them. (c) The manner of enhancement of profits by reason of the special aptitude or qualifications of the directors. (d) Legitimate business needs of the assessee. (e) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roval of the Government. The section lays down that the Government shall not accord its approval for any such appointment unless it is satisfied that the terms and conditions thereof are fair and reasonable. There is no reason to assume that in the instant case the authorities concerned did not carry out their statutory duties and before according approval to the appointment of M. M. Thapar as a director of the assessee did not consider the terms and conditions of his appointment to ascertain whether they were fair and reasonable. Both the ITO and the AAC proceeded on the basis that M. M. Thapar had meagre qualification and little experience . Whether a particular director is qualified or not or whether his experience is sufficient or not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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