Law:

Section:

I. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1970-71 - Whether expenditure incurred on repairs and renovation of furnace was of revenue in nature and was deductible - Held, yes II. Section 40(a)(v), read with section 40(c) of the Income-tax Act, 1961 - Business disallowance - Ceiling on perquisite - Assessment year 1970-71 - Assessee-company paid commission to directors but same was disallowed by ITO on ground that it was not allowable in terms of section 40(a)(v) - AAC confirmed disallowance holding that assessee was a family concern, and directors had substantial voice in fixing their remuneration - Tribunal deleted addition holding that section 40(a)(v) was not applicable - It did not consider reasonableness of allowance under section 40(c) - Whether Tribunal was not justified in deleting disallowance without considering applicability of section 40(c) - Held, yes (Matter Remanded Back) Section 254 of the Income-tax Act, 1961 - Appellate Tribunal - Powers of- Assessment year 1970-71 - Whether where remand involves investigation into new aspects or other sources of allowance, remand should not be resorted to; but where new sources do not fall for consideration, Tribunal is fully empowered either to remand it or to go into question itself - Held, yes FACTS I The assessee claimed that the amount incurred in the repairs and renovation of the furnace was revenue expenditure. The ITO, however, rejected the claim. The AAC as well as the Tribunal decided in favour of the assessee. On reference: FACTS II The ITO held that the commission paid by the assessee to the directors was not allowable in terms of section 40(a)( v). The AAC upheld the said order on the ground that the perquisites, i.e., commission paid to the directors, were not salaries but benefit and that the company was more or less a family concern and the directors had substantial, if not decisive, voice in fixing their own remuneration. On appeal, the Tribunal only applied itself to the question whether the case fell within the mischief of section 40(a)( v) and held that application of section 40(a)( v) was not correct. It did not disturb the…

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