Dipak Kumar Sen, J. - (1.) M/s. Natsin India Private Ltd., the assessee, is a private limited company. In the assessment year 1971-72, the relevant previous year ending on the 31st March, 1971, the assessee claimed deduction of Rs. 38,600 being remuneration paid to its directors. The ITO found that compared to the previous year, there was an increase in the turnover of the assessee by only Rs. 10,000 against which the directors' remuneration has been correspondingly increased by Rs. 10,000. It was also found that the business showed a negligible profit of Rs. 81. The ITO held that such increase of the directors' remuneration was unreasonable and disallowed the same to the extent of Rs. 6,600.
(2.) Being aggrieved, the assessee preferred an appeal from the said order. It was contended before the AAC that the ITO had ignored the contribution by the principal of the assessee, a foreign company, of amounts aggregating to Rs. 73,000 as against Rs. 30,000 received in the immediately preceding year. It was also pointed out that there had been an increase to the extent of Rs. 43,000 in the volume of business. The AAC, following its decision in the immediately preceding year, directed the ITO to allow increment at the rate of Rs. 100 per month to one of the directors, namely, S. N. Singh, and Rs. 50 to another director, A. K. Jauhar.
(3.) The assessee preferred a further appeal to the Income-tax Appellate1 Tribunal. It was reiterated before the Tribunal, on behalf of the assessee, that there was an increase in the business of the assessee in the relevant year in respect of the agency commission earned. This amount increased from Rs. 28,686 to Rs. 38,000. It was also reiterated that the foreign principal of the assessee had increased the reimbursement of expenses and the assessee had received in the year in question Rs. 73,000 as against Rs. 30,000 in the previous assessment year. It was submitted that due to the expansion of the assessee's business, a new branch had been opened by the assessee at Delhi and a new director, viz., Mr. A. K. Jauhar, had to be appointed. On such facts it was contended that no part of the remuneration paid to S. N. Singh could be disallowed. On behalf of the revenue it was submitted that the Tribunal having decided the same question in the preceding assessment year, the matter was covered.;