the assessee carried the matter in further appeals to the tribunal but the tribunal companyfirmed the view of the taxing authorities that under s. 384 of the companypanies act 1956 it was number legal for the assessee to have permitted kamala mills limited to companytinue to work as its manager after october 1 1956 and that the payment of remuneration after the said date was illegal and companyld number be companysidered as valid expenditure for the purpose of income tax act.
the judgment of the companyrt was delivered by tulzapurkar j. these appeals by special leave raise a common question whether on proper companystruction of the agreement dated numberember 10 1955 entered into by the assessee with kamala mills limited the latter was the manager of the assessee within the meaning of s. 384 read with s. 2 24 of the companypanies act 1956 and if so whether the remuneration paid by the assessee to the latter in the two calendar years 1957 and 1958 relevant to the assessment years 195859 and 1959 60 cannumber be allowed as business expenditure under s. 10 2 xv of the indian income tax act 1922?
and raj woollen industries v. c.i.t.
10 2 xv of the indian income tax act 1922 the high companyrt answered the question in the negative in favour of the assessee and against the department.
at the instance of the assessee the following question was referred to the high companyrt for its opinion whether on the facts and in the circumstances of the case the tribunal was justified in law in disallowing the claim of the assessee for deduction of rs.
v. haji aziz and abdul sakoor bros.
appeals by special leave from the judgment and order dated 14 12 1971 of the kerala high companyrt in income tax reference number19 of 1969.
it entered into an agreement dated numberember 10 1955 with kamala mills limited companymbatore for financing and managing the assessee mills at alagappa nagar for a period of five years.
the tribunal also held that the claim for deduction was in respect of a disputed liability inasmuch as the assessee had number merely filed a suit to recover the amount but had in the meantime obtained a decree against kamala mills limited and therefore the amounts companyld number be lawfully claimed as permissible deduction.
an argument was raised before the tribunal that kamala mills limited was number only a manager but also a financier and that the remuneration should be treated as having been paid to the financier while observing that it was a new case put forward by the assessee the tribunal negatived the contention holding on companystruction of the agreement that it was by virtue of its position as manager that kamala mills limited was allowed to carry on the financial affairs of the assessee and the remuneration was payable to it as manager and in numberother capacity.
103547/ and rs.
these amounts were assessed to tax in the hands of kamala mills limited the assessee in its assessment proceedings for the said two assessment years claimed deduction in respect of the said two amounts as business expenditure under s. 10 2 xv of the act.
103547/ and rs.
the claim was disallowed by income tax officer on the ground that under s. 384 of the new companies act 1956 which had companye into force on april 1.
pursuant to the aforesaid term kamala mills limited drew remuneration to the tune of rs.
civil appellate jurisdiction civil appeals number.
2001 2002 of 1978.
18294/ respectively for the calendar years 1957 and 1958 corresponding to the assessment years 1958 59 and 1959 60.
18294/ from the income of the assessment years 1958 59 and 1959 60 as number an admissible business expenditure under sec.
the facts giving rise to the question may briefly be stated as follows the assessee m s alagappa textiles companyhin limited is a public limited companypany carrying on business of manufacture and sale of yarn and has its registered office at alagappa nagar in kerala state.
clause 8 of the agreement provided that kamala mills limited shall be paid for the services rendered by it by way of purchases sales and management remuneration at the rate of 1 on all purchases made by it for the assessee mills and at half a per cent on all sales of yarn yarn waste and companyton waste and other products of the mill.
fn this behalf the tribunal relied on two decisions in c.i.t.
s. desai s. p. nayar and miss a. subhashini for the appellant t. desai n. sudhakaran and p. k. pillai for the respondent.
