Law: Income Tax Act, 1922

Section: 10(1)(xvi),66(1),66(2)

Income-tax Act, 1922 -- Section 10(2)(xvi) -- Business expenditure -- Private Limited Company -- Director -- Remuneration -- Father and his four sons incorporating themselves into a private limited company and in terms of a resolution passed by them appointing themselves as directors and fixing their remunerations -- Tribunal's finding that there was no noticeable contribution by father to the conduct of the business and remuneration paid to him was not bona fide on business or commercial expediency -- Finding based on materials on record -- No exercise of any subjective consideration while disallowing the remuneration -- Whether finding of fact, not giving rise to any question of law -- Held yes -- JUDGMENT The judgment of the court was delivered by MUHAMMAD HALEEM, ACTG. C.J.---This order will govern Civil Appeals Nos. 24 and 25 of 1972 which arise from the common order of the former High Court of West Pakistan, Lahore, dated 9th of March, 1970, by which Civil Miscellaneous Applications Nos. 967 and 968 of 1970 were dismissed. Leave to appeal in both the appeals was granted to consider the common question as to whether disallowance of Rs. 18,000, incurred by the assessee/appellant for payment of salary to S.M. Ilyas, a Director, was permissible under the provisions of Section 10(1)(xvi) of the Income-tax Act. On the analogy of a similar question, decided by this Court in a case reported in PLD 1969 SC 70, this question arose as under: The appellant/assessee is a private limited company and carries on the business of a stockist and distributor of locally manufactured goods of other concerns and as commission agent. It has five Directors, namely, Sh. Muhammad Ilyas, Sh. Muhammad Ilmas, Sh. Muhammad Riaz, Sh. Muhammad Fayyaz and Sh. Muhammad Ikhlas. Sh. Muhammad Ilyas is the father of the other four Directors and also the Chairman of the Board of Directors. In the resolution, appointing them as such, their remuneration was fixed as under:- Sh. Muhammad Ilyas ... Rs. 1,500 p.m. Sh. Muhammad Ilmas ... Rs. 2,000 p.m. Sh. Muhammad Raiz ... Rs. 2,000 p.m. Sh. Muhammad Fayyaz ... Rs. 2,000 p.m. Before the incorporation as a private limited company, it carried on…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492