TMI Blog1982 (3) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... To many family men and women, innocent of company law, it is quite an artificial situation to find husband and wife, father and soil, brothers and sisters, in laws and in laws going through the motions of broad-room etiquette, passing resolutions, signing minutes books, entering into contracts of service, getting paid salaries, voting themselves benefits and the like. Company law is bereft of family feeling, if it is coldly approached. It insists on the members of the family doing the right thing as members of the company. Income-tax, however, sees through the facade. It has got to. Most of the time there is no need to lift the veil of incorporation. In many companies held by families, the veil is made of pure gauze. It is the prerogative of the ITO to see through things to get at the fiscal realities. Recently the income-tax code has made an express enabling provision. Not that the ITO has had any real need to be armed with a specific power. The express provision, however, in so many words, enables the ITO to disallow certain items of expenditure in what may be broadly described as " closed " companies. The modus operandi in such cases is that the expenditure incurred by the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reholders and all, is at one and the same place. The business of the company is to act as the selling agents for the products of Velsicol Chemical Corporation, U.S.A. The main products manufactured and distributed by M/s. Velsicol Chemical Corporation is endrine, which is a substance used in the manufacture of pesticides and insecticides. The role of the assessee as agent of the American company is to import the goods and supply them to various constituent dealers and sub-dealers on the basis of the orders placed by them. The assessee-company obtains commission for its labours. It appears from the record that Venugopal, the chairman of the company, had made trips to the United States, apparently in connection with the company's business. It is said that he was accompanied by his wife, Anusuyadevi. The formal agreement of agency between the American company and the assessee-company was the result of this American trip. Under the terms of the articles of the association of the assesseecompany, there is to be a board of directors with a chairman and a director. One of the articles provides that the managing director may be paid such remuneration for managing the affairs of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l observed that primarily it was for the assessee-company to produce evidence to show that the remuneration and commission paid to the managing director were not excessive or unreasonable in terms of s. 40(c)(i) of the Act. Turning to the material evidence in the case, the Tribunal observed that there was nothing to show that Anusuyadevi participated in the business affairs of certain earlier partnership firms and acquired any experience which was useful for the conduct of the assessee company's business. The Tribunal found that even her trips abroad along with her husband could not have added to the sum total of her business knowledge or experience. The Tribunal also pointed out that Anusuyadevi had no special qualifications or background which would have equipped her for carrying on the business of the company, such as canvassing orders for the products of the American company from customers in India. The Tribunal referred, in particular, to Anusuyadevi's deposition before the AAC and observed that her answers to questions showed that she had hardly anything to do with the business of the company in the matter of indenting and receiving orders for the products of the American com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased on a consideration of business expediency. Learned counsel submits that the fact that Anusuyadevi was related by marriage to the other members and directors of the company cannot by itself be a sufficient consideration for the ITO to reject any portion of the remuneration payable to her in consideration of the services rendered by her as a managing director. Learned counsel was particularly critical of the provisions of s. 40(c) and the reliance placed by the Tribunal on the absence of any special qualification or special training in Anusuyadevi as a ground for disallowance of the commission paid to her. Learned counsel urged that even if s. 40(c)(i) were regarded as applicable to this case at all, the disallowance cannot be founded on the absence of any technical or special qualification in Anusuyadevi. Learned counsel pointed out that want of managerial or technical qualification is not one of the statutory grounds on which payment of commission or other remuneration can be rejected either in whole or in part. Having listened to the arguments of learned counsel, it seems to us that the findings through which we were conducted were wholly in the region of facts. Before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s court sitting in reference ought not to interfere with the ultimate determination by the Tribunal, since every step towards the conclusion of the Tribunal only bristles with the factual findings and inferences. The decision of the Tribunal can only be found fault with on a point of law if it could be urged that the Tribunal bad misdirected themselves in law while addressing themselves to the facts, or if it could be found that the conclusion arrived at by the Tribunal is perverse or is not based on a reasonable view of the facts. The assessee's learned counsel said that in one part of their reasoning the Tribunal had taken a wrong step. Learned counsel pointed out that the Tribunal expected to find in Anusuyadevi some special qualification which really was lacking in her. Learned counsel said that this was quite a wrong approach to s. 40(c). As to this particular argument, we may agree that presence or absence of special qualification has not been made one of the grounds for disallowance in whole or in part of the remuneration to the director in a closed company under section 40(c)(i) of the Act. But we cannot entirely disregard this aspect of the equipment or want of it, in Mrs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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