COMMISSIONER OF INCOME TAX Vs. BASTI SUGAR MILLS COMPANY LIMITED

JUDGEMENT

(1.) THE CIT has filed this petition under S. 256(2) of the INCOME TAX ACT, 1961, for directing the Tribunal to state a case and refer the following questions to this Court for its opinion:

(2.) SO far as the first question is concerned, the contention of learned counsel appearing for the petitioner is that the appointment of Shri Dev Raj Narang, managing director, though it was approved by the Company Law Board, the approval was conditional. The condition was not fulfilled and, therefore, in law, there was no approval. The Company Law Board approved the appointment of Shri Dev Raj Narang as the managing director of the respondent -company for a period of five years. One of the conditions was that "the managing director shall give an undertaking to the company that he shall not, so long as he functions as such, become interested or otherwise concerned directly or through his wife and/or minor children in any selling agency of the company in future without the prior approval of the Company Law Board". Learned counsel appearing for the petitioner has pointed out that Shri Dev Raj Narang was a director of Gokul Chand Narang Cosmetics Industries Ltd. which was a sole selling agency of the respondent -company and, therefore, this condition was violated. The CIT (A) as well as the Tribunal have found that he was a director of the said Gokul Chand Narang Cosmetics Industries Ltd. since its incorporation. He did not acquire any interest in the said company after the grant of the approval. The condition barred acquiring any interest in any selling agency of the respondent -company in the future. The wording of the condition is very clear. There is no scope for any other interpretation and, in our view, there is no justification for calling for a reference so far as this question is concerned.

(3.) THE third question, in our view, relates to the interpretation of the provisions contained in S. 40A (3). Sec. 40A(3) of the IT Act provides "where the assessee incurs any expenditure in respect of which payment is made, after such date (not being later than the 31st day of March, 1969) as may be specified in this behalf by the Central Government by notification in the Official Gazette, in a sum exceeding two thousand five hundred rupees otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, such expenditure shall not be allowed as a deduction".