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Commissioner Of Income-Tax vs Sree Rajendra Mills Ltd. on 19 April, 1973 cites

Commissioner Of Income-Tax vs Ramakrishna Mills (Coimbatore) Ltd. on 19 December, 1972

6. A somewhat similar question came up for consideration before this court in T.Cs. Nos, 45 of 1967 and 122 of 1968 [Commissioner of Income-tax v. Ramakrishna Mills (Coimbatore) Ltd., [1974] 93 I.T.R. 49 (Mad.)]. There certain payments made to the manager of the company was not allowed as a deduction under Section 10(2)(xv) on the ground that the manager happened to be a partner in the managing agency firm and that, therefore, the payment of remuneration to him along with the commission paid to the managing agents far exceeded the limit specified in Section 348 of the Companies Act. Such disallowance was questioned before this court. It was held in that case that the Income-tax Act is a self-contained code, that the allowability of a deduction under Section 10(2)(xv) has to be considered only in the light of the provisions of the Income-tax Act, and that it is not possible to travel outside the provisions of that Act and deny the benefit of that Section, on the ground that the payment is unauthorised or has been prohibited by some other statute. In view of the said decision even though there is an infringement of Section 360 of the Companies Act in this case, still there being admittedly an actual payment for the actual services rendered by Chookalingam Chettiar as general manager, the amounts paid will be an allowable deduction under Section 10(2)(xv). The amount has really been paid out by the company to the said person. It is true that the provision in Section 363 of the Companies Act makes him a trustee in respect of that amount, but as and when the amount is recovered from him on the basis of Section 363, the revenue can invoke Section 10(2A) and proceed to treat the amounts recovered as income of the company. As a matter of fact, in this case, the said amounts have been recovered from Chockalingam Chettiar under Section 363 by the company and those amounts have also been taxed by the revenue under Section 10(2A) in the years in which they have been recovered. We are not inclined to agree with the contention of the. revenue that as Chockalingam Chettiar becomes a trustee for the amounts received by him by virtue of Section 363 of the Companies Act, it has to be taken that there is no expenditure incurred by the company for the years in question. There has been actual expenditure in this case, and it is only by virtue of Section 363 of the Companies Act that the amounts are liable to be recovered from the person concerned. That will not lead to the position that no expenditure had been incurred by the company. We are of the view that the Income-tax Act itself contemplates such a situation as this and has, therefore, specifically provided in Section 10(2A) that if the assessee has received whether in cash or in any other manner whatsoever any amount in respect of such expenditure the amounts so received shall be deemed to be the profits or gains that have arisen in the previous year. We are, therefore, of the view that the Tribunal is right in upholding the claim of deduction put forward by the assessee in this case.
Madras High Court Cites 28 - Cited by 32 - V Ramaswami - Full Document
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