TMI Blog1969 (12) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... -for the assessment years 1951-52, 1952-53 and 1953-54. The company is doing business of manufacturing " enamelled-ware ". It had originally employed a " technician " at a monthly salary of Rs. 500. In June, 1941, the technician was relieved, and one Col. Bhattacharya who was a director of the company was appointed its " technical adviser ". He was to receive as remuneration 15% of the gross annual profits of the company. Col. Bhattacharya resigned his office and Dr. Ganguly (son-in-law of Col. Bhattacharya) was appointed to that office. The board of directors resolved on May, 18, 1950, to pay to Dr. Ganguly 15% of the gross annual profits (without deducting depreciation) as his remuneration. In the assessment years 1951-52, 1952-53 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be paid to an employee and production of vouchers for payment together with proof of rendering service do not exclude an enquiry whether the expenditure was laid out wholly and exclusively for the purpose of the assessee's business. It is open to the tax officers to hold--agreement to pay and payment notwithstanding--that the expenditure was not laid out wholly and exclusively for the purpose of the business : Swadeshi Cotton Mills Co. Ltd. case. But an inference from the facts found that the expenditure was wholly and exclusively laid out for the purpose of the business is one of law and not of fact, and the High Court in a reference under section 66 of the Income-tax Act is competent to decide that inference raised by the Tribunal is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for a short period. In the view of the Income-tax Officer, Dr. Ganguly came to be appointed to the post of technical adviser of the company as soon as his father-in-law vacated the post and the " generous remuneration offered to him was influenced by factors other than commercial considerations, and considering that Dr. Ganguly was giving up his professional practice in allopathic medicine which yielded him an annual income of Rs. 20,000 to engage himself as a whole time adviser attending to the development of the industry, a gross remuneration of Rs. 3,500 per month, besides the remuneration of Rs. 1,000 per month that he obtained as secretary of the managing agents of the company, would be adequate. " With that view the Appellate Assis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot substitute their own view as to the reasonable remuneration which should have been agreed to be paid to the employee. But the taxing authority may disallow an expenditure claimed on the ground that the payment is not real or is not incurred by the assessee in the course of his business or that it is not laid out wholly and exclusively for the purpose of the business of the assessee. Thereby, the authority does not substitute its own view of how the assessee's business affairs should be managed, but proceeds to disallow the expenditure because the condition of its admissibility is absent. It has been uniformly found by all the authorities that the remuneration agreed to be paid to Dr. Ganguly was influenced by " extra-commercial cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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