Law:

Section:

Section 40(c) of the Income-tax Act, 1961 - Business disallowances - Remuneration, etc., paid in excess of prescribed limit in case of company etc. - Assessment year 1969-70 - Whether where Tribunal had material before it and after perusing evidence and material, it disallowed a part of salary paid to Managing Director and Executive Director as being unreasonable, High Court could not go into and interfere with findings of fact arrived at by Tribunal - Held, yes Section 33 of the Income-tax Act, 1961 - Development rebate - Assessment year 1969-70 - Assessee-company had purchased some machinery to start manufacturing discs for tractors - However, it could not install said machinery due to paucity of space and as it was lying idle assessee let said machinery on hire and claimed development rebate on it - Whether mere fact that there was a clause in memorandum of association of assessee that company could hire out machinery did not mean that it actually carried on business of letting on hire machinery or that every machinery purchased by it was for purpose of hiring out same - Held, yes - Whether, since intention of assessee-company at time of purchase of machinery was to manufacture discs for tractors and not to let it on hire, it could not be said that machinery purchased was let out on hire as a business activity and, therefore, assessee would not be entitled to development rebate on such machinery - Held, yes FACTS The assessee company used to purchase Toka blades and discs from a sister concern and sell the same in the market. During the relevant accounting period the assessee-company appointed one 'P' as the managing director, on a salary of Rs. 3,000 per month and his son, R as executive director, on a salary of Rs. 2,500 per month. The ITO held that P was not actively working for the assessee-company and that the salary paid to him was not business consideration. He, therefore, disallowed the entire claim of the assessee-company in respect of the salary paid to 'P'. As regards R, the ITO considered his salary at Rs. 1,000 per month to be reasonable on the ground that the remaining salary was not paid for business consideration. Regarding the claim of…

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