M/S. L & T Hochtief Seabird Joint ... vs The Dy It Cir 12(2), Mumbai on 30 September, 2019
In the case of Trade Wings Ltd. (supra) the assessee is a limited
company. The AY is 1978-79. During the relevant previous year, the
assessee-company paid guarantee commission of Rs.91,194/- to its
managing director for giving personal guarantee to various banks and
insurance companies for the loans advanced by them to the assessee-
company. The ITO included the above amount in the remuneration paid
to the managing director for the purpose of working out the ceiling u/s
40(c) of the Act. In appeal, the CIT(A) held that the guarantee commission
paid the managing director could not be regarded as remuneration or
perquisite within the meaning of section 40(c) of the Act for the purpose
of the ceiling prescribed therein. In further appeal by the revenue, the
Tribunal held that the guarantee commission paid to the managing
director of the Company was outside the purview of section 40A(5) of the
Act. In appeal by the revenue, the Hon'ble High Court held that: