Search Results Page
Search Results
1 - 7 of 7 (0.51 seconds)Income Tax Rules, 1962
Section 10 in The Income Tax Act, 1961 [Entire Act]
Shyamlal Pragnarain vs Commissioner Of Income-Tax, U.P., ... on 5 January, 1955
Bhargava, J. who delivered the
judgement of the Bench in arriving at the conclusion that
the disallowance of the amounts was act justified followed a
Full Bench judgement of that Court in Shyamlal Pragnarain v.
C.I.T.(2). In that Full Bench it was observed that what the
Excess Profits Tax Officer had to bear in mind is that the
amount could be disallowed in whole or in part if it was
found that it was not reasonable and it was not necessary
having regard to the requirements of the business and the
actual services rendered by the managers. The question as
to the terms of the contract, it said "may have been a
(1) 33 I.T.R. 826.
Section 66 in Income Tax Rules, 1962 [Entire Act]
The British India Corporation Ltd. vs The Commissioner Of Excess Profits Tax ... on 22 March, 1957
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) consisting 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 not
necessary and not reasonable amounted to holding that the
previous practice and agreements save no indication that the
commission 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. According to that
court this was not the basis on which the question of
reasonableness and necessity of the payments had to be
decided. But what the officer and the Tribunal ought to
have decided is the question whether or not these payments
were necessary and justified, having regard to the ordinary
commercial practice and commercial expediency ,and taking
into account the services rendered by the persons to whom
the _payments were made.
Ahmedabad Manufacturing And Calico ... vs Commissioner Of Excess Profits Tax, ... on 20 March, 1950
This rule is de-signed to prevent the dissipation of the
excess profits by inflating expenditure which has no
relation to the requirements of the business. The, test is,
whether the expenditure is unreasonable and unnecessary
having regard to the requirements of the business and in the
case of directors' fees or other payments for services to
the actual services rendered. There is of course no
reference in this rule to commercial expediency or
commercial practice in considering whether an expenditure is
unreasonable and unnecessary having regard to the
requirements of the business. But that is another way of
saying that all relevant factors must be taken into
consideration by the Excess Profits Tax Officer in con-
sidering whether that expenditure is reasonable and
necessary. What it means is that the Excess Profits Tax
Officer could not apply the rule to increase that can be
justified on ordinary commercial principles because an
increase in profits may in certain cases be due to increase
in the activity of the management or increase in the
establishment justifying a corresponding increase in the
expenditure. The Full Bench decision in Shyamlal's case
came up consideration by this Court in Ahmedabad
Manufacturing & Calico Printing Co. v. Commr. of E.P.T.(1).
That was also a case where the question was whether in
determining the profits on which the percentage had to be
determined for payment of bonus to five of its employees and
the contribution to be made to the provident funds of 5 3
employees, deduction, of depreciation, income-tax and super-
tax in respect of first category and deduction of income-tax
or excess profits tax in respect of the second category
could be made before arriving at the profits. The Excess
Profits Tax Officer came to the conclusion that the payments
were unnecessarily large and unreasonable having regard to
the requirements of the business and without taking up each
individual case he held, applying rule 12 that it was: not
necessary for the assessee company for the purpose of its
business to calculate the bonus or the contribution on that
basis of net profits before the deduction of excess profits
tax. He accordingly disallowed the excess of the payment
calculated without deduction of that tax. In upholding the
disallowance this Court held that there was material on
which the Excess Profits Tax Officer could arrive at a
finding and on which the Tribunal could confirm that
finding. In that case also the Excess Profits Tax Officer,
in the assessment order relating to the chargeable
accounting year ending December 31, 1943 gave sufficient
reasons for disallowing the amounts which reasons were
incorporated by reference in the assessment orders
pertaining to the disallowance of the claim in the
chargeable accounting years in question. In the earlier
order the reasons given were as follows :
1