TMI Blog1974 (7) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... 922, and the Rules framed thereunder, had to be deducted in arriving at the not profits. Section 10(2)(vi) of the Indian Income-tax Act, 1922, and rule 8 framed thereunder, provided the manner in which the written down value of the assets had to be calculated. For the assessment year 1960-61, corresponding to the accounting year ending with March 31, 1960, the company calculated the depreciation allowable under the rules at Rs. 17,63,233, and deducting this amount from the total profit of Rs. 73,38,417 the net profit was arrived at Rs. 55,75,184, and ascertained the managing agents' remuneration at 10 per cent. of this amount at Rs. 5,57,518.41. This amount was claimed as a deduction in the computation of the company's income for the year e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess sum of Rs. 73,272 was deleted by the Income-tax Officer and added on to the income of the assessee for the assessment year 1960-64. The assessee appealed to the Appellate Assistant Commissioner. It was contended by the assessee that at the time of the general body meeting, the amended rule had not come into force and as per the rules then existing the amount was correctly calculated and that the company could not have waited till the assessment proceedings were over in order to pay the managing agents' remuneration and, therefore, the entire amount of Rs. 5,57,518.41 paid by them should have been deducted from their income. The Appellate Assistant Commissioner agreed with this submission and deleted the addition of Rs. 73,272. The Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely from an anterior period, we have to imagine that the amended rule had always been in existence even from the anterior date. This is a well-established proposition and needs no further elucidation. If that be so, the calculation made by the assessee on the basis of the unamended rule is incorrect and the payment made to the managing agents an over-payment. It is not in dispute that if the managing agent's remuneration will have to be calculated on the basis of the amended rule, the sum of Rs. 73,272 now in question would be an amount not paid in accordance with the agreement. By calculating the depreciation allowance at a smaller figure than that provided under the amended rule, the net profits had been arrived at at a higher figure ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remuneration, the said Doraiswamy Naidu, in his capacity as manager of the company, had received remuneration of Rs. 24,900, Rs. 26,100 and Rs. 27,300, respectively, in respect of the three assessment years. The company claimed allowance for the remuneration paid to the managing agency firm and also for the salary paid to the manager. The Income-tax Officer allowed the remuneration paid to the managing agency firm but disallowed the salary paid to the said R. Doraiswamy Naidu on the ground that the salary paid to him amounted to remuneration paid to the managing agent and that, as it was in excess of ten per cent. of the net profits of the company during the years of account, the payment is prohibited by section 348 of the Indian Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming the amount as an allowable deduction under section 10(2)(xv) and we followed the ratio of the judgment in Commissioner of Income-tax v. Ramakrishna Mills (Coimbatore) Ltd. We are unable to see how these two judgments in any way help the assessee in claiming the deduction of this sum of Rs. 73,272. In the reported cases, as we have seen, the amount was paid for services rendered and, as per the provisions of the Income-tax Act, that was an allowable deduction under section 10(2)(xv). The only argument was that the payment was in contravention of either section 348 or section 360 of the Companies Act. In the case on hand, the facts are different. The payment of the sum of Rs. 73,272 was in excess of the liability of the company under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come of the assessee was, therefore, strictly in accordance with the provisions of the Act and the Rules. The learned counsel for the assessee then drew our attention to section 10(2A) of the Income-tax Act and contended that on the same analogy any amount paid in excess of the amount due to the managing agents would in law be deemed to be held by the managing agents as trustees and liable to be repaid to the company and as and when the amount is paid back by the managing agents to the company or the company is able to recover the same, it could be assessed in their hands as income of the year in which the sum was received. In particular, he contended that this principle should be invoked because the entire amount was paid as per the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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