It was pointed out that Shri J.P. Vaish was in numberway related to the proprietors of the firm and the companymission on profits clause was inserted to create the interest of Shri J.P. Vaish in the running of the mill which was old and unbalanced and had never worked companytinuously or satisfactorily before it was taken over by the assessee.
6,000 per annum as allowance for the .accounting year 1947 48.
After hat he had training in the Aluminium Corporation of India Ltd. Lakshmi Rattan Cotton Mills Ltd. and the Road Products Ltd.,Ramput.
As directed by the High Court, the Appellate Tribunal submitted a statement of case under s. 66 2 of the Income Tax Act, 1922 on the following question of law Whether in the circumstances of the case, the sum of Rs.
After the death of Shri Vaish in July 1947, the firm was companyverted into a companypany and the post of the General Manager was abolished and one of the Directors who managed the affairs of the companypany was given Rs.
37,733 paid to the General Manager Shri J.P. Vaish, which has been disallowed by the income tax Appellate Tribunal was an amount laid out or expended wholly or exclusively for the purpose of the business of the assessee ?
Against the disallowance of Rs.
1 lakh, the companymission payable to Shri J.P. Vaish was 25.
4,063 as companymission.
Appeal by special leave from the judgment and order, dated May 22, 1962 of the Allahabad High Court in Income tax Reference No.
He also found that numbergeneral practice of giving companymission at the rate of 25 existed in the assessees line of business.
1 lakh, Shri Vaish received a sum of Rs.
250 p.m. It was one of the terms of the appointment that in case the profits exceeded Rs.
The assessee took the matter in appeal to the Income Tax Appellate Tribunal which by its order, dated July 10, 1950 dismissed the appeal.
75,465 as companymission to Shri J.P. Vaish calculated at the rate of 25 on the profits.
Taking into account the circumstances of the case, the Income Tax Officer determined a sum of Rs.
Shri J.P. Vaish was also given free medical facility for himself and the members of his family.
424 of 1958.
assessment year 1948 49, the assessee paid a sum of Rs.
He accordingly increased the companymission payable from Rs.
By its judgment, dated May 22, 1962, the High Court answered the question against the assessee.
37,732 in that year.
1,000 p.m., companymission of 12 1/2 on the net profits of the firm payable after the accounts had been ascertained fully by the auditors and a car allowance of Rs.
75,465 paid to Shri Vaish was an amount laid out wholly and exclusively for the purpose of the business of the assessee within the meaning of s. 10 2 xv of the Income Tax Act, 1922.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
In the present case, both the Appellate Assistant Commissioner and the Appellate Tribunal rejected the view of the Income Tax Officer that the rate of companymission .paid to Shri Vaish was number fixed on account of business companysiderations but there was some companylateral reason.
During the first 14 months the mills made numberprofit and Shri J.P. Vaish was paid numberhing beyond his salary and car allowance.
In the next 12 months he succeeded in securing an order for Lohis from Government and so the mill made some profit and the amount of the Managers companymission was proportionately very small in terms of the agreement.
5,000 as a reasonable amount payable as companymission.
The large profit in 1946 47 was made due to new design of civilian rugs Shri Vaish introduced for the first time in the mill after studying public tastes and the qualifies and designs prevailing in the market.
37,733 paid to Shri J. P. Vaish was an amount laid out or expended wholly or exclusively for the purpose of the business of the assessee and was wrongly disallowed by the Income Tax Appellate Tribunal.
The view of the Appellate Assistant Commissioner has been affirmed by the Income Tax Appellate Tribunal.
5,000 was number sufficient and it was reasonable to allow the payment of companymission at the rate of 121/2.
Counsel for the assessee also pOinted out that Shri Vaish Was educated in a Public School at Dehra Dun and thereafter studied at the Benaras College and at the Engineering COllege of the Benaras Hindu University for Electrical and Mechanical Engi neering and then joined the Commerce College at Delhi.
It was also said that Shri Vaish had a special aptitude to show in his work so far as the marketability of the goods was companycerned.
18,000 per annum as remuneration and Rs.
Against the judgment of the High Court the present appeal is brought by special leave.
70,465 paid as companymission to the General Manager, the assessee preferred an appeal to the Appellate Assistant Commissioner of Income Tax who by his order, dated October 31, 1949 found that Rs.
For the.
For the assessment year 1948 49 the assessee claimed a deduction of Rs.
591 of 1967.
Sen, B.D. Sharma and R.N. Sachthey, for the respondent.
75,465 as companymission paid to the General Manager Shri J.P. Vaish.
C. Chagla and B.P. Maheshwari, for the appellant.
In the next year the profit being less than Rs.
The assessee claimed deduction of the said amount from the assessable income.
In terms of the letter of appointment Shri Vaish got numbercommission in the first year as the mill suffered a loss.
5,000 to Rs.
The Judgment of the Court was delivered by Ramaswami, J. The appellant hereinafter called the assessee carried on the business of manufacture and sale of blankets and other woollen cloth.
According to the terms of appointment Shri J.P. Vaish was to draw a fixed salary of Rs.
By his assessment order, dated June 30, 1949, the Income Tax Officer disallowed the claim on the ground that it was excessive and quite unreasonable looking to the salary paid to Shri Vaish.
