Law: Income Tax Act, 1922

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

Law: Income Tax Ordinance, 1979

Section: 23(1)(viii),23(xviii)

Income-tax Act, 1922 -- Sections 10(2), 10(2)(x), 10(2)(xvi) -- Remuneration paid to Special Directors of Company by way of commission at the rate of 20 percent of net profits -- Partial disallowance not maintained -- Remuneration paid to special Directors of Company by way of commission at the rate of 20 per cent of net profits -- Partial disallowance not maintained -- Falls under clause(xvi) -- Entire expenditure allowed -- Substance rather than nomenclature to be looked to -- Entire expenditure allowed -- Partial disallowance not maintained -- Company carrying on business in Pakistan and Indian under common management -- Entire remuneration allowed to special Directors under S.10(2)(xvi) not to be set off against income in India -- Special Director's tour abroad in connection with assessee company's export business -- All including hotel expenses admissible deductions - Corresponding Sections: Income-tax Ordinance, 1979 -- Sections 23(1)(viii), 23(xviii) -- ORDER (The judgment was delivered by Sayed Ali Khan, President).- These appeals arise out of the appellant's assessments made, respectively, for the charge years 1948-49, 1950-51, 1951-52, 1952-53, 1953-54 and 1954-55. 2. We would like to take up the appeal for the assessment year 1948-49 first. The assessee is a private limited company (hereinafter called "the company1') and has been treated as 'resident and ordinarily resident' both in India and in Pakistan. The relevant year of account is the year ending the 31st July, 1947. The first objection concerns the partial disallowance of the remuneration paid to the Special Directors of the company. The remuneration in each case was fixed in the very beginning of the year and it consisted of (a) fixed amount of Rs. 200/- p.m. and(b) a commission of 20% of the net profit of the company. In respect of the relevant year of account the total amount paid to these Directors aggregated Rs. 42,574. The Income-tax Officer allowed Rs.200/- p.m. in each case but disallowed the entire amount of commission paid to both the Directors. On appeal the Appellate Assistant Commissioner did not concur in the opinion expressed by the Income-tax Officer and came to the conclusion…

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