Law:

Section:

Section 28(i) of the income-tax act, 1961-Business deduction/loss-As chairman of board of directors, gs looked after management of assessee-company during accounting year ended 31-3-1967 relevant to assessment year 1967-68 but his remuneration was actually quantified much later by resolution passed on 22-1-1968-ITO and aac rejected claim for deduction of said remuneration in assessment year 1967-68 since liability was not actually taken into account books in that year-Tribunal held that liability to pay had accrued in law in that year and directed ito to quantify allowable amount under section 40(c)-Whether justified-Held, on facts, yes Facts As chairman of the board of directors, GS looked after the management of the assessee-company during the accounting period relevant to the assessment year 1967-68 but no remuneration was actually fixed or determined for him during that period. Subsequently, by a resolution passed at an extraordinary general meeting of shareholders held on 22-1-1968, he was paid a certain amount towards remuneration and other benefits, and the assessee-company claimed deductions on this account by filing a revised return for the assessment year 1967-68. The ITO took the view that the claim for deduction of expenditure was allowable only when it was actually taken into account books, and that since the impugned amount was considered for deduction in the accounts for the subsequent assessment year 1968-69, it was not admissible in the assessment year 1967-68. The AAC rejected the assessee's appeal. On further appeal, the Tribunal took the view that the mere fact that the liability was quantified after the close of the accounting year was not an adequate reason to disallow the claim for deduction of the impugned expenditure. The Tribunal, accordingly, remanded the case to the ITO to examine the question of admissibility of the expenditure in the light of the provisions of section 40(c). On reference, the revenue sought to support its case by arguing that the appointment of GS was violative of section 314(1) of the Companies Act, 1956, the liability to pay the impugned remuneration could not be said to have arisen in the assessment year…

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