Law:

Section:

Section 254, read with sections 40(c) and 37, of Income-tax Act, 1961 – Appellate Tribunal – Powers of – Assessment years 1962-63 and 1963-64 – Whether if for reasons recorded by departmental authority in respect of contention raised by assessee, grant of relief to him on another ground was justified, it would be open to departmental authority and Tribunal, and indeed they would be under duty, to grant that relief – By virtue of an agreement assessee-company appointed ‘BL' as its secretaries and paid monthly remuneration of ‘BL' as well as reimbursed expenses incurred by ‘BL' on behalf of assessee for various services rendered – ITO disallowed entire remuneration in view of section 37 and section 40(c)(i) – AAC held that remuneration paid to ‘BL' was excessive in terms of section 40(c) and, therefore, made partial disallowance – Tribunal held that section 40(c) was inapplicable – However, it found that services rendered by ‘BL' had no direct and immediate impact on company's trade or extent of business; that there were no secretaries in first two years of assessee's working and that ‘BL' had been engaged as secretaries in third year of company's work while they were on point of losing their managing agency – Accordingly, Tribunal sustained disallowance partially under section 37 on ground that entire remuneration paid was not wholly and exclusively for purpose of assessee's business – Whether conclusion drawn by Tribunal could not be said as either not possible in law or perverse conclusion – Held, yes FACTS By virtue of an agreement appointing ‘BL' as secretaries of the company for the relevant assessment years, the assessee-company paid a specified amount as monthly remuneration and also reimbursed the expenses incurred by ‘BL' on behalf of the assessee, in respect of various services rendered. The ITO disallowed the entire remuneration paid to ‘BL' in view of the provisions of section 37 as well as section 40(c)( i), holding (i ) that ‘BL' rendered various managerial services to the assessee-company and other concerns of which it charged fees; (ii) that the assessee did not, despite several opportunities given, show any satisfactory evidence of the necessity…

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