- (1.) THE assessee is a private limited company engaged in the production of wheat flour and allied products at Patiala and Delhi and also maintains a cold storage. Shri Harmukh Rai Modi was paid managerial remunerations amounting to Rs. 93,878, Rs. 1,23,835 and Rs. 81,492 in the three years, namely, 1972-73, 1973-74 and 1974-75, respectively. These remunerations included salary at the rate of Rs. 2,000 per month and commission at the rate of 4% of the net profit of the company. Whereas, according to the assessee, the provisions of Section 40a (5) of the Income-tax Act, 1961 (hereinafter called " the Act "), permitted salary and other remunerations in respect of a director to the tune of Rs. 72,000 per annum, according to the ITO, the maximum permissible salary was actually Rs. 60,000 per annum. The Tribunal allowed a deduction of the sum of Rs. 72,000 to the assessee.
(2.) IN respect of the dispute regarding relief under Section 80j of the Act pertaining to assessment year 1973-74, it was accepted by the parties that the judgment of this court in CIT v. Patiala Flour Mills Co, (P.) Ltd. [1978] 113 ITR 55 covered the issue in favour of the assessee. However, since the revenue thought that the acceptance of the appeal by the Supreme Court might reverse the view, the revenue got the second question referred to this court with regard to the deduction under Section 80j of the Act.
(3.) ON a submission made by the revenue, the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh, has referred the following questions to this court for its opinion: Assessment years 1972-73 to 1974-75. " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the assessee-company is entitled to deduction of Rs. 72,000 per annum in respect of salary/ remuneration paid to Shri Harmukh Rai Modi under Sub-section (5) (a) of Section 40a of the Income-tax Act, 1961 ? " Assessment year 1973-74. " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in allowing the deduction of Rs. 79,744 under Section 80j of the Income-tax Act, 1961 ? ";