9911796707
TMI Blog1969 (12) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany 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 and 1953-54 the company claimed under section 10(2)(xv) of the Income-tax Act, 1922, as admissible allowance, in computing its taxable income, Rs. 52,947, Rs. 64,356 and Rs. 79,227 respectively paid as remuneration to Dr. Ganguly under the terms of the resolution dated May 18, 1950. The Income-tax Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 erroneous in law. In the present case, the facts found are these : Col. Bhattacharya and his son-in-law, Dr. Ganguly, were two of the directors of the company who between them held on January 1, 1950, 49% of the total number of shares of the company and the other directors of the company held only 1% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering 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 Assistant Commissioner and the Income-tax Appellate Tribunal have substantially agreed. The Tribunal observed that they were inclined to conclude that " extra-commercial considerations " had influenced the fixation of remuneration of Dr. Ganguly and that partial disallowance of the remuneration " so influenced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 considerations ". Dr. Ganguly and Col. Bhattacharya were able to control the voting before the board of directors. Dr. Ganguly was not trained in the technique of " enamelled-ware ", and had no special qualifications for the post. The remuneration agreed to be paid was much in excess of what was normally payabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
