TMI Blog1996 (4) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... dt. 31st December, 1972. He, therefore, offered only this amount of Rs. 10,000 for assessment. The ITO was of the view that the salary for the period from 1st April, 1972 to 31st Dec., 1972, has to be governed by the first resolution, which was, in his opinion, the only resolution in force during this period. While he accepted the salary of Rs. 10,000 per annum for the last three months, he reckoned the salary at Rs. 2,500 per mensem for the first nine months. The ITO, therefore, computed the salary at Rs. 25,000 for the year as against Rs. 10,000 returned by the assessee. 3. Aggrieved, the assessee filed an appeal before the AAC. The AAC found that the latter resolution was within the accounting year itself. He was, therefore, of the view that the latter resolution, dt. 31st December, 1972, should be given effect to. However, he found that the assessee had actually drawn a sum of Rs. 12,000 during the accounting year by way of remuneration as seen from the copy of his personal account in the company. The AAC , therefore, adopted the income at Rs. 12,000 as against Rs. 25,000 computed by the ITO and Rs. 10,000 claimed by the assessee. 4. Aggrieved, the Department filed an app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 500 per mensem. In the second resolution, dt. 31st Dec., 1972, the remuneration was reduced to Rs. 10,000 per annum for the period from 1st April, 1972 to 31st March, 1973. According to learned standing counsel, the second resolution passed by the company, with the consent of the assessee, would have no effect. According to learned standing counsel, the resolution would not operate retrospectively. Therefore, it was submitted that inasmuch as the salary income as determined by the first resolution accrued to the assessee for the first nine months, the salary income for the entire year is to be calculated at the rate of Rs. 2,500 per mensem. In so far as the alternative contention put forward by the assessee is concerned, learned standing counsel appearing for the Department submitted that inasmuch as this plea was not argued before the Tribunal, it is not open to learned counsel appearing for the assessee to make this submission for deduction of the balance of amount while taxing the salary income. 6. We have heard the rival submissions. The issue that arises for consideration is whether the assessee is liable to tax on Rs. 10,000 on the basis of the second resolution or on Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r month did not entitle him to remuneration in the circumstances. On these facts a question arose whether on the facts and circumstances, the sum of Rs. 11,250 is assessable under s. 7 of the Indian IT Act, 1922. While answering this question this Court held that even if the resolution in this case was to be read as having the effect of denying the salary during the period of nine months to the assessee, or if it is to be taken that the assessee had waived the accrued remuneration, such denial, withdrawal or waiver occurred subsequent to the assessment year, and it would, therefore, be totally ineffective in the computation of the income for the assessment year, which would be liable to tax under s. 7. The entries made in the folio page relating to the assessee in the books of the company, having particular regard to the terms of the agreement, would appear to be irrevocable entries and it would not be open to the board of directors to cancel these entries in their effect by the resolution. On this view also, the remuneration for the period of nine months can be rightly brought to tax. Similarly, this Court had an occasion to consider a similar question in CIT vs. P. Nataraja Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... salary of Rs. 2,000 per month for April to August, 1964, and Rs. 500 per month for January to March, 1965, he having waived the salary for the months September to December, 1964, was rejected by the officer, who assessed him on a salary calculated at Rs. 2,000 per month. Similarly for 1966-67, the assessee's claim for assessment on a salary of Rs. 500 per month from April to December, 1965, and at Rs. 1,000 per month for January to March, 1966, was also negatived and he was assessed on the basis of Rs. 2,000 per month. Though the AAC confirmed the assessments, the Tribunal held that the debt which the company owed to the assessee after August, 1964, was equal to the reduced amounts paid to the assessee and not a sum of Rs. 2,000 per month, and consequently accepted the assessee's claim. On a reference, this Court held that there was nothing in the resolutions or anywhere else to show that there was an understanding arrived at between the managing director and the company before the accrual of the remuneration payable to him, regarding the waiver of the remuneration, the resolution itself being after the relevant year, the assessee was entitled to the remuneration at the rate of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te relief must be given by way of deduction to the assessee concerned, as otherwise the very basic principle of accrual will be violated. However, having regard to the nature of the questions referred to us, we do not think it necessary or proper to go into this aspect." 12. In CIT vs. Bachubhai Nagindas Shah , the Gujarat High Court also had an occasion to consider a similar point as arising in the present case. According to the facts arising in that case, the assessee was appointed a director of a private company on a remuneration of Rs. 400 p.m. In 1962, for which the assessment year was 1963-64, the company incurred losses and on 18th March, 1963, the board of directors resolved that the directors should waive their remuneration for 1962. Accordingly, the assessee waived his right to remuneration in the sum of Rs. 4,800, which had become due to him for the calendar year 1962. But the ITO included the amount of Rs. 4,800 in the income for the asst. yr. 1962-63. However, in second appeal, the Tribunal came to the conclusion that the assessee having forgone the remuneration due to him, the question of assessing the same in his hands did not arise and deleted the amount of Rs. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself and debited to the managed companies. In November, 1947, the assessee desired to have the managing agency transferred to two private companies and in this connection agreed in December, 1948, to accept 21/2 per cent. as commission and gave up 75 per cent. of its earnings. The Department sought to assess the amounts of Rs. 1,36,903 and Rs. 2,00,625 being the 75 per cent. which the assessee had given up on the ground that commission at 10 per cent. had already accrued to the assessee in the year of account and the agreement in December, 1948, after the close of the previous year to give up a portion of that income, could not save that portion from liability to income-tax. On these facts, the Supreme Court held that : "the subsequent agreement had altered the rate of commission in such a way as to make the income which really accrued to the assessee different from what had been entered in the books of account. This was not a case of a gift by the assessee to the managed companies of a portion of income which had already accrued, but an agreement to receive a lesser remuneration than what had been agreed upon. The assessee had, in fact, received only the lesser amount in spite o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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