TMI Blog1977 (11) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer in making the assessment-disallowed a sum of Rs. 1,75,000 out of the sum of Rs. 3,91,150 claimed by the assessee as having been paid as directors' remuneration. The Income-tax Officer held that such payment to the extent of the said sum of Rs. 1,75,000 Was excessive and unreasonable. Further, the assessee had paid a sum of Rs. 6,826 as contribution to a provident fund in East Pakistan where the assessee carried on business during the said assessment year. This provident fund was recognised by the Pakistan authorities but not by the Indian revenue authorities. The assessee claimed a deduction for the said sum of Rs. 6,826 which was disallowed by the Income-tax Officer. On appeal the Appellate Assistant Commissioner held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question would be whether an alleged payment to a provident fund is merely an a appropriation in the accounts, the assessee retaining full control over the amount, or whether the payment is to an outside body and is beyond the assessee's control. As the Appellate Assistant Commissioner has correctly observed, the payment would have to be deducted in computing the Pakistan income, if the provident fund has been set up under an irrevocable trust." From the aforesaid order of the Tribunal, the follow ing questions have been referred : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in allowing the entire remuneration to the directors as admissible deduction for the purpose of assessment un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch income. In support of his proposition he cited a decision of the Supreme Court in the case of Commissioner of Income-tax v. C. Parakh Co. (India) Ltd. [1956] 29 ITR 661. It was held by the Supreme Court in that case, that where an assessee carried on the same business at a number of places for the purpose of section 10 of the Indian Income-tax Act, 1922, they should be deemed to be only one business and the net profits thereof had to be ascertained by pooling together the profits earned in all the branches and deducting all the expenses, and the fact that some of the branches were in foreign territory would make no difference to the position, if the assessee was resident and ordinarily resident within India. Mr. Pal also cited a decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyees' Provident Funds Act, 1952, and claimed deduction of the amount of the transfer in computing its profits. It was that the amount in question had been spent and paid out in the relevant accounting period, and was deductible as expenditure incurred exclusively for purpose of the business of the respondent under section 10(3)(xv)) of the Indian Income-tax Act, 1922. To appreciate the controversy in this case, it is necessary to consider the relevant sections in the Act. Section 2(38) of the Income-tax Act, 1961, defines a recognised provident fund, inter alia, as follows : " ' Recognised provident fund ' means a provident fund which has been and continues to be recognised by the Commissioner in accordance with the rules contained in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides as follows : " 37. General.--(1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head ' Profits and gains of business or profession '." It appears to us that the Tribunal correctly appreciated the question involved and proceeded to compute the foreign income of the assessee. In such computation, the Tribunal proceeded by deducting the contribution to the foreign provident fund as expenditure allowable for the purpose of earning the foreign income for the det ..... X X X X Extracts X X X X X X X X Extracts X X X X
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