Sen, J. - (1.) At the instance of the Commissioner of Income-tax, West Bengal IV, Calcutta, this court has directed the Tribunal under Section 66(2) of the Indian I.T. Act, 1922, to draw up a statement of case and refer the following question : "Whether, on the facts and in the circumstances of the case and on a proper construction of Section 10(4A) of the Indian I.T. Act, 1922, the payment of Rs. 1,00,777 to Shri M. M. Thapar by way of salary and profit commission was excessive or unreasonable so as to justify the disallowance of a portion thereof ?"
(2.) The facts found and/or admitted in these proceedings are shortly as follows: Messrs. Karam Chand Thapar & Bros. (P.) Ltd., Calcutta, the assessee, is a private limited company. In the assessment year 1961-62, the relevant previous year being the one ended on the 31st March, 1961, Rs. 1,00,777 paid to M. M. Thapar, son of late Karamchand Thapar, by way of remuneration consisting of salary, allowance and share of profits, came up for consideration during the assessment. M. M. Thapar had worked as a director of the assessee in the said assessment year. The ITO held that M. M. Thapar who had joined the assessee for a short period would not have been paid the same high remuneration as other experienced directors on business considerations and such remuneration was paid only because he was the son of the late Karam Chand Thapar, the managing director of the assessee at the relevant time. In the circumstances, the ITO allowed a part of the remuneration being Rs. 36,000 and disallowed the balance.
(3.) Being aggrieved, the assessee preferred an appeal. The AAC noted that in the earlier assessment years 1959-60 and 1960-61, a portion of the remuneration paid to M. M. Thapar had been disallowed. He also took into account that the main income of the assessee was agency commission mostly received from Sri Gopal Paper Mills and Ballarpur Paper and Straw Board Mills Ltd. He found that M. M. Thapar had a diploma in textile engineering from the California University and was previously employed in Jagatjit Cotton Textile Mills Ltd., a company managed by the assessee, at a salary of Rs. 1,000 per month and as such had no special qualifications for looking after the paper mills. He found further that profit commission was being paid only to the directors who were the members of the Thapar family and not to the other directors.;