1989 (8) TMI 51 - HC - Income Tax

Summary

Issues: Interpretation of section 40A(2) in relation to approval of remuneration by the Company Law Board.

Summary:
The Commissioner of Income-tax sought reference regarding the correctness of the order confirming the approved remuneration of an employee by the Company Law Board, under section 40A(2), leading to the deletion of disallowance of Rs. 1,20,014. The employee in question was the son of a director of the respondent-company, and the remuneration was approved by the Company Law Board. The Income-tax Officer invoked section 40A(2) due to perceived excessive salary relative to the employee's qualifications. The Commissioner of Income-tax (Appeals) determined that section 40A(5) was more applicable than section 40A(2). The Income-tax Appellate Tribunal concurred, stating that the Company Law Board's approval rendered section 40A(2) inapplicable. The Tribunal emphasized that the Board's approval signified reasonable remuneration based on professional qualifications and experience. As the Board had the authority to fix remuneration under the Companies Act, the Tribunal found no grounds to challenge the decision unless there was evidence of misrepresentation or lack of disclosure. Ultimately, the court dismissed the petition, affirming the Tribunal's factual conclusion and finding no legal question to address.