In arriving at these amounts the Excess Profits Tax Officer ignored the terms of appointment and the resolutions and drew support from the orders passed by the Tribunal in respect of the two prior assessments for the accounting periods ended December 31, 1943 and December 31, 1946, against which orders of the Tribunal a reference had earlier been made to the Allahabad High Court.
The companymission to be paid was either fixed at the time of appointment or by resolution passed subsequently.
The Judgment of the Court was delivered by JAGANMOHAN REDDY, J. These appeals are by certificate against the Judgment of the Allahabad High Court in a reference under S. 21 of the Excess Profits Tax Act, 1940 hereinafter called the Act read with s. 66 2 of the Indian Income tax Act, 1922.
Appeals by certificate from the judgment and order dated October 22, 1965 of the Allahabad High Court in Income tax Reference No.
In so far as the two chargeable accounting periods are companycerned, the position in regard to the payment of the companymission has been set out in the statement of the case but this is number relevant for the purpose of these appeals except to numbere.
It was found that for the first chargeable accounting period the Excess profits payable were approximately Rs.
This reference was then pending before it when the subsequent assessments were being dealt with.
T. Desai, Alok Kumar Verma and B. P. Singh for the appellant Sen, J. Ramamurthy, B.D. Sharma and R. N. Sachthey for the respondent.
These files were produced before the Tribunal in the appeals for the assessments in question.
whether the amounts claimed by the Corporation in respect of each of the assessment year was rightly disallowed under rule 12 1 of tile First Schedule to the Act.
This companymission was in addition to the directors fees and or stipulated monthly salary.
Both these questions were answered in the affirmative.
In the case of others the profits made by the Corporation as a whole were taken into companysideration.
1,28,743/ was rightly disallowed under rule 12 1 of Schedule I to the Excess Profits Tax Act?
11,47,143 for the first chargeable accounting period and Rs.
1946 he determined the amount as Rs.
5,39,057.
In the appeals against assessments made for the accounting periods in the instant case, it was admitted on behalf of the Corporation before the Tribunal that there was numbernew material other than what was on record in the, Excess Profits Tax assessment files and the Tribunal files relating to the chargeable accounting periods for the years 1943 and 1944.
64,36,000/ but if the companymission was to be paid on the net audited profits of Rs.
CIVIL APPELLATE JURISDICTION Civil Appeal Nos.
Applying the same method for the following accounting chargeable, period ended March 3 1.
But what the officer and the Tribunal ought to have decided is the question whether or number these payments were necessary and justified, having regard to the ordinary companymercial practice and companymercial expediency ,and taking into account the services rendered by the persons to whom the payments were made.
It appears that for a long time and even before the Act came into force the companyporation has been remunerating its directors including the Managing Director and branch managers by way of companymission based on a certain fixed percentage of its net audited profits.
1987 to 1988 of 1.969.
The facts and circumstances of the case on which these answers were given are The assessee is a public limited companypany hereinafter called the Corporation having several branches and subsidiary companypanies.
1.37 crores, the whole excess profits which companyld number be retained by the Corporation for its own use would be taken into account for the payment of the companymission as such be determined the portion to be disallowed was at 8.4 of the said excess profits which will be payable to the State on account of the Exces Profits Tax liability.
It has a Board of Directors which looks after its business.
These two amounts were disallowed in the assessments for the respective chargeable accounting periods.
On this basis the amount worked out was Rs.
11,06,693 for the second chargeable accounting period companyld number be allowed and was further of the view that a portion of it was number reasonable and necessary having regard to the requirements of the business and the actual services rendered by the persons companycerned.
1,28,743/ .
In the case of a branch manager the amount of companymission to be paid was calculated on the profits of the branch of which he was in charge.
The branches of the Company are looked after by mangers who ,ire members of the Board of Directors.
Against that order the High Court on a reference under the Act companysidered a similar question, viz.
154 of 1957.
Though this was so under the Income tax Act the Excess Profits Tax Officer on the facts of the case and having regard to rule 12 of the Schedule to the Act took the view that since the companymission in the respective chargeable accounting periods were paid out of the profits which companyld number be retained by the Corporation, a portion of the companymission attributable to the Excess Profits Tax Act earned in the peculiar circumstances of a national calamity was number reasonable and necessary within the meaning of the said rule.
The Tribunal however dismissed those appeals following its earlier decision relating to the chargeable accounting periods for 1943 and 1944.
In the earlier reference for the assessment in respect of the assessment years 1943 and 1944, a Bench of the Allahabad High Court in British India CorPoration Ltd. v. Commr.
of E.P.T. 1 companysisting of Bhargava, J. as he was and Mehrotra, J. were of the View that the findings of the Excess Profits Tax Officer that the payments were both number necessary and number reasonable amounted to holding that the previous practice and agreements save numberindication that the companymission had to be paid without deducting the excess profits tax from the net profits and that the payments made were beyond the terms of the agreement.
The Excess Profits Tax Officer accordingly held that Rs.
