TMI Blog1992 (9) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... 30th June as the accounting year. The first common issue involved is whether provisions of section 40(c) are applicable to the directors in respect of commission paid to them or provisions of section 40A(5) are applicable. So far as the case of the assessee is concerned, it has assumed two aspects, namely, whether provisions of section 40(c) as such or provisions of section 40A(5) as such are applicable. Alternatively, if provisions of section 40(c) are applicable as claimed by the assessee, whether it would cover the commission paid to the directors or not. While computing the total income for these years under appeal, the Assessing Officer has applied provisions of section 40A(5) in general as applicable to managing director of the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the CIT (Appeals) for directing exclusion of the commission from the purview of section 40(c). 6. We have duly considered the rival submissions. The scope of the controversy before us has been narrowed down considerably because both the parties are disputing the application of provisions of section 40A(5) or 40(c) and in case section 40(c) is applicable, whether commission is to be excluded for the purpose of disallowance of section 40(c) or not. There is no doubt that there is conflict of judicial opinion regarding the issue whether provisions of section 40(c) are applicable to the director-employees or not. The decision of the Punjab and Haryana High Court in CIT v. Avon Cycles (P.) Ltd. [1980] 126 ITR 448 was concerned with the paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account for the purpose of section 40(c). These decisions turn on the facts of those cases and therefore, there could not be any dispute about the correctness of those decisions. But those decisions are not applicable to the instant case of the assessee where the payments were made to the Managing Director, who is an employee. 7. On the other hand, the Gujarat High Court in the case of Saurashtra Cement Chemical Industries Ltd. v. CIT [1980] 123 ITR 669 based on earlier decision in the case of Addl. CIT v. Tarun Commercial Mills Ltd. [1978] 113 ITR 745 has held that payment to directors could not fall under section 40A(5) since a specific provision under section 40(c) exists on the statute. The Tribunal, Special Bench in the case of Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and scope of clauses (b) and (c) of section 40 are different and the word 'remuneration' used in clause (c) need not take its colour from the same expression used in clause (b). That apart, clause (b) not only uses the word 'commission' but also uses the word 'salary' in addition to remuneration. In the instant case, it was not even suggested by the assessee that because of the specific use of the expression 'salary' in clause (b) and omission of it in clause (c), clause (c) should not include the salary also. In fact, the salary and commission paid to R were nothing but a part of the remuneration for the services rendered by him as the managing director of the company. " The Special Bench 'B' Bombay in the case of ITO v. Sapt Textiles ..... X X X X Extracts X X X X X X X X Extracts X X X X
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