- (1.) INCOME-TAX Cases Nos. 45, 46 and 47 of 1976 arise between the same parties and since common questions of law and fact are involved therein, they are being disposed of by one judgment.
(2.) THE assessee is a private limited company carrying on the business of manufacture of pistons at Amritsar. Earlier its status was that of a partnership firm and it was converted into a private limited company with effect from April 1, 1968. The dispute relates to the salary paid to Sh. Sadhu Singh, the permanent life director of the company. On the basis of the articles of association of the company, the board of directors passed a resolution on June 1, 1968, fixing the monthly salary of Sh. Sadhu Singh at Rs. 3,000 with an annual increment of Rs. 200, the salary rising up to a maximum of Rs. 4,000 per month.
(3.) FOR the assessment year 1969-70, the salary of Sh. Sadhu Singh was fixed at Rs. 3,000 per month in accordance with the aforementioned resolution of the board of directors. The ITO did not agree with this fixation of salary as he was of the opinion that in view of the legitimate business needs of the assessee the salary of Rs. 3,000 per month paid to Sh. Sadhu Singh was excessive. Accordingly, he disallowed the salary to the extent of Rs. 1,250 per month under Section 40 (c) of the I. T. Act, 1961 (hereinafter called "the Act" ). The assessee filed an appeal against the order passed by the ITO which was dismissed. Second appeal was taken to the Income-tax Appellate Tribunal which fixed the salary of Sh. Sadhu Singh at Rs. 2,500 per month along with annual increments at the rate of Rs. 200. The application filed by the assessee before the Appellate Tribunal to state the questions of law arising out of its order to us for our opinion was dismissed.;