TMI Blog1980 (3) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... ars, relevant to assessment years 1970-71 and 1973-74, the company paid the following amounts as annual remuneration to its directors, other than the managing directors: 1.Rs. 6,000 for the assessment year 1970-71. 2.Rs. 13,500, for the assessment year 1973-74. The assessee in I.T.R. No. 86 of 1978 and 87 of 1978 is M/s. Marketing Services Agency (P.) Ltd., which too is a company registered under the Indian Companies Act. During the previous years relevant to the assessment years 1971-72, 1972-73 and 1973-74, this assessee also paid a sum of Rs, 3,069, ₹ 6,684 and ₹ 6,257, as annual remuneration to its directors. Both the assessees claimed that the amount of annual remuneration paid by them to their directors should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the sum of ₹ 6,684 paid by the assessee as annual remuneration to the directors of the company was not eligible for deduction under section 40(c) of the Income-tax Act, 1961 ? For the year 1973-74 (Reference No. 87 of 1978): Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the sum of ₹ 6,257 paid by the assessee as annual remuneration to the directors of the company was not eligible for deduction from the income of the assessee ? For the year 1973-74 (Reference No. 88 of 1978) : Whether, on the facts and in the circumstances of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contrary in sections 30 to 39, the following amounts shall not be deducted, in computing the income chargeable under the head 'Profits and gains of business or profession';... (c) in the case of any company- , (i) any expenditure which results directly or indirectly in the provision of any remuneration or benefit or, amenity to a director or to a person who has a substantial interest in the company or to a relative of the director or of such person, as the case may be,... if in the opinion of the Income-tax Officer any such expenditure or allowance as is mentioned in sub-clauses (i) and (ii ) is excessive or unreasonable having regard to the legitimate business needs of the company and the benefit derived by or accruing to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 13,500 paid to the directors in these cases could not be said to be unreasonable. The claim by the assessee was refuted on behalf of the revenue on the ground that the business of the assessees was being looked after by the managing director alone and that there was absolutely no evidence to indicate that the other members of the board of directors did anything more than attending the board's meeting. It was pointed out that the assessee did not claim that the remuneration paid to the members of the board of directors for attending the meetings of the board was inadequate. There was thus no material to indicate that the members of the board of directors did anything for the benefit of the company to justify the payment of the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd to be paid for service rendered by the director's. Under the circumstances we hold that there is no evidence to show that the directors rendered any other service except attending the board's meetings and the remuneration paid to them was hit by section 40(c ) of the Income-tax Act. The disallowances are, therefore, confirmed. In substance, the finding recorded by the Tribunal is that even though according to the articles of association it was possible for the directors of the company to render service for the benefit of the company on occasions other than at the time of the meeting of the board of directors, there was absolutely no material to show that the directors, in fact, rendered any such service to the company outsid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cific activity which had been beneficial to the assessee. Learned counsel for the assessee has also failed to show that the resolution, authorising payment of annual remuneration to the members of the board of directors, had been passed in consideration of any activity of the members of the board of directors which was or which was expected to be beneficial for the assessee-company. In these circumstances, the finding of the Income-tax authorities that the remuneration had been sanctioned for extra-commercial considerations does not appear to be unreasonable or unjustified. Learned counsel appearing on behalf of the assessee cited before us the cases of CIT v. Edward Keventer (P.) Ltd. [1972] 86 ITR 370 (Cal) and J. K. Steel Industries ..... X X X X Extracts X X X X X X X X Extracts X X X X
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