Sabyasachi Mukharji, J. - (1.) In this reference under Section 256(1) of the I.T. Act, the following question has been referred to this court: " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in holding that the disallowance made out of salary paid to Mr. J. D. Somerville could be sustained under Section 40(c) of the Income-tax Act, 1961 ?"
(2.) The assessee is M/s. Eastern Scales Pvt. Ltd. and the present statement relates to the assessment years 1973-74 and 1974-75 for which the corresponding previous years are the financial years ending on 31st March, 1973, and 31st March, 1974, respectively. In the appeals which were filed by the assessee for these two years the Tribunal was called upon to decide two issues: one relating to the curtailment of the deduction in respect of the managing director's salary from Rs. 42,350 per annum as claimed, to Rs. 36,000 per annum under the provisions of Section 40(c) and the other regarding the disallowance of Rs. 14,572 (for the assessment year 1973-74) and Rs. 15,295 (for the assessment year 1974-75) being the deduction claimed by way of gratuity liability under the Compulsory Gratuity Act, 1971.
(3.) In so far as the first of these two issues was concerned, it was observed by the Tribunal that, in restricting the deduction in respect of the managing director's remuneration, the authorities below had merely followed the decision of the Tribunal on this very issue for the earlier years. An attempt was, however, made by the learned counsel for the assessee to urge that a vital aspect of the matter had not been considered by the Tribunal in the earlier years and hence the decision of the Tribunal required reconsideration. It was submitted that prior to his becoming the managing director, Sri J. D. Somerville was a director of the assessee-com-pany. On the retirement of the then managing director, Sri J. D. Somerville was appointed to that post but the post of director which he had till then occupied was not filled, with the result that he was obliged to perform the functions which were till then being performed by two persons. This fact, according to the learned counsel, had not been taken into account by the Tribunal when it rendered its decision for the earlier years and it was for this reason that the said decision, in his opinion, required reconsideration. This contention was disposed of by the Tribunal in the following terms: " The contention now sought to be raised before us by the learned counsel for the assessee was never urged in earlier years. There is also no material on record to show that there was any necessity for the appointment of any director other than the managing director from the assessment year 1970-71. He has also not been able to show any improvement in the business of the assessee-company in the assessment years under consideration. We, therefore, do not find any reason to take a view different from what the Tribunal has taken from the assessment years 1970-71 to 1972-73. We, therefore, affirm the orders of the Appellate Assistant Commissioner.";