RAMAN AND RAMAN LIMITED Vs. COMMISSIONER OF INCOME TAX MADRAS

JUDGEMENT

(1.) THE following questions have been referred to us for our opinion :

(2.) THE two questions set out above respectively concern the propriety of the deductions claimed by the assessee in respect of salaries paid to the managing director, Narayana Iyer, and the technical qualified director, Kasiraman, during the two years of account relevant to the assessment years 1953-54 and 1952-53. THE assessee's year of account coincides with the financial year. Originally Narayana Iyer was having a business in running buses and lorries in Thanjavur district as a proprietary concern. On December 8, 1937, a private limited company known as Messrs. Raman and Raman Ltd. was formed and the business, goodwill and assets till then belonging to Narayana Iyer were transferred to the company, the present assessee. THE company issued 500 shares of which Narayana Iyer as managing director owned 350 shares. His son, Kasiraman, owned 20 shares and most of the remaining shares were held by certain near relations of the aforesaid persons. Kasiraman who and qualified himself in automobile engineering become director from 1950. THEre and the other directors were paid remuneration in accordance with resolutions passed by the directors and the general body from time to time.

(3.) FOR the assessment years 1952-53 and 1953-54 the subject matter of this reference, the Income-tax Officer allowed the sums of Rs. 25, 000 and Rs. 26, 000 respectively for the two years thus disallowing the sums of Rs. 7, 500 and Rs. 6, 500 respectively in regard to the managing director's remuneration. The disallowance was affirmed on appeal by the Appellate Assistant Commissioner and on further appeal by the Appellate Tribunal. The first part of the two questions referred to above refers to the propriety of the disallowance.As regards the remuneration for Kasiraman in regard to the portion disallowed for the assessment years 1949-50 to 1951-52 appeals are pending before the Tribunal. FOR the two years 1952-53 and 1953-54 which are the subject matter of reference the assessee claimed Rs. 11, 400 and Rs. 17, 500 respectively. The Income-tax Officer allowed as proper deduction only Rs. 6, 000 for each year thus disallowing Rs. 5, 400 and Rs. 11, 500. These which have been confirmed on appeal and further appeal form the subject matter of the latter part of the two questions.