TMI Blog1996 (6) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act at the instance of the Revenue and the following two questions of law have been referred by the Tribunal for answer of this court : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee-company was entitled to the benefits conferred by the provisions of sections 80-HH and 80-I of the Income-tax Act, 1961? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the commission resolved to be paid to the directors by the company cannot be considered for the purpose of invoking the provisions of section 40(c) of the Income-tax Act, 1961? " The assessee is a new private limited company and commenced its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same as was used by the erstwhile firm and, hence, he concluded that no new industrial unit has been set up as claimed. Similarly, he also denied the deductions under section 80-I as he found that the assessee had failed to satisfy all the conditions laid down in sub-section (2) of section 80-I. The Assessing Officer also made a disallowance of Rs. 1,93,790 under section 40(c) of the Income-tax Act, i.e., remuneration and commission paid to Shri Motilal Jain, chairman, Shri Jeewanlal Jain, managing director, Shri Prakash Chand Jain, director, and Shri Azad Kumar Jain, director. Besides the remuneration, commission at certain rates on the net profits had been paid to the above directors varying from 3 per cent. to 1.5 per cent. and this wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls along with liabilities and not immovable properties and the trade mark; (v) partners of the erstwhile firm, who have entered into an agreement with the appellant-company are charging licence fee from the company for the use and exploitation of trade mark; and (vi) some property of the erstwhile partners of the dissolved firm has also been taken on rent by the appellant-company. On the basis of these admitted facts, the finding given by the Assessing Officer was found to be not sustainable. These admitted facts which emerge from the order of the appellate authority, make it clear that it was not a purchase of the wholesale firm but only purchase of certain things and started functioning as a new company because sales tax number, cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the board on January 1, 1982, and it has nothing to do with the salary which was paid to some of the partners. This commission was paid to them for their financial involvement and they having given guarantee for the loans taken by the company. It was contended that there was no proximity between these two. The appellate authority held that this was not in lieu of salary paid to them for the full time services rendered by them. Therefore, it was not considered to be salary. It was also found that it was not in excess warranting any part for disallowance under section 40(c). The appellate authority divided it in two parts, i.e., salary and commission, and treated this as commission only and not part of salary and not found to be excessiv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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