Law:

Section:

Section 37(1) of the Income-tax Act, 1961 [Corresponding to section 10(2)(xv) of the Indian Income-tax Act, 1922] - Business expenditure - Allowability of - Assessment years 1953-54 and 1954-55 - Assessee company was engaged in business of managing agent - It's business was managed by three directors and it had also appointed three executive officers - By a resolution, assessee increased remuneration of above directors officers and other employees with a retrospective effect - ITO disallowed claim of assessee for deduction assessee during relevant assessment years on ground that since increase in remuneration of salary of officers was not reflected in increase in profits of assessee, and it was not expenditure which could be justified as laid out wholly and necessarily for purposes of business under section 10(2)(xv) of Act of 1922 - Order of ITO was upheld by AAC - However, Tribunal partially allowed remuneration increased with respect to directors employees but did not give any reason for disallowance remaining part - On reference, High Court took view that work of assessee had increased considerably and had become more strenuous by reason of prosperity of managed companies and it would be reasonable and natural to infer that 'strain on both directors and top executives had increased justifying increase in their remuneration' - Whether rule that increased remuneration can only be justified if there be corresponding increase in profits of employer was erroneous - Held, yes - Whether in facts and circumstances of case, High Court was justified in holding that order of Tribunal disallowing claim for allowance of whole of additional remuneration was not supported by any evidence - Held, yes FACTS The assessee company was carrying on the business of acting as managing agents. The business of the assessee was managed by three directors. The assessee had also employed three executive officers to administer its affairs. By a resolution the remuneration of each of the directors of the assessee was increased with retrospective effect by Rs. 1,000 per month and two out of the three officers by Rs. 500 per month and of the remaining officer by Rs. 750 per month. In the…

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