- (1.) These appeals are preferred by the Revenue against an order of the Bombay High Court rejecting an application under Section 256(2) of the Income-tax Act. By means of the said application the Revenue sought to raise the following three questions : "(i) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the commission paid by the assessee-company to its directors was an additional remuneration forming part and parcel of the salary allowed to them and that the said remuneration would not be covered by Section 40(a)(v) of the Income-tax Act and thereby allowing the assessee's claim for allowing the deduction of the whole amount of commission paid to the directors? (ii) Whether the Tribunal was right in their view that the words "whether convertible into money or not" used in Section 40(a)(v) of the Act postulated that the benefit, amenity or perquisite mentioned therein covers, benefit, amenity or perquisite allowed in kind but not in cash? (iii) Whether the Tribunal was right in holding that the expenditure of Rs. 19,386 for the assessment year 1971-72 and Rs. 29,283 for the assessment year 1972-73 did not represent entertainment expenditure within the meaning of Section 37(ii) of the Income-tax Act?"
(2.) The assessment years concerned herein are 1971-72 and 1972-73. The first two questions go together. The provision applicable for the A.Y. 1971-72 was Section 40(a)(v) whereas for the A.Y. 1972-73, the provision applicable is Section 40A(5) which is a successor provision to Section 40(a)(v).
(3.) The respondent is a private limited company trading in tractors and earth moving equipment. During the accounting years relevant to the aforesaid assessment years, the assessee paid to three of its Directors commission on sales in addition to salary as follows : JUDGEMENT_246_3_1993_1.html;