MUNEENDRA Vs. SRINIVASAPPA

JUDGEMENT

(1.) THESE two appeals arise out of the orders passed in respect of two assessment years 1983-84 and 1984-85. The question involved in both these appeals is one and the same and therefore, they are taken up for consideration together and disposed of by this common order.

(2.) THE assessee is a Registered Firm of construction Engineers and Designers. On 29.9.1984, assessee filed a return admitting an income of Rs.4,00,000/-. On 30.1.1985 the assessee again filed a return disclosing an income of Rs.3,95,430/-. Another revised return was filed on 3.9.1986. In the interregnum between the filing of the return on 30.1.1985 and 3.9.1986, a search under section 132 was conducted in the assessee"s premises on 29.7.1986. THE assessee"s main income during the year is from the contract receipts for civil construction from M/s. Karnataka Ball Bearings Corporation Ltd. THE material on record disclose that the assessee submitted a tender for Rs.1,28,18,413/- dated 29.3.1982 for civil work for the aforesaid company to their architects Master and Associates, Bangalore. On 16.7.1982, the assessee was intimated about the allotment of the work. According to the assessee the work commenced in August, whereas, the Income Tax Officer refers to the assessee"s own letter wherefrom it could be detected that the commencement of work is on 16.7.1982. At the relevant point of time, Sri. A.P. Mehta was the Chairman and his son Sri. Jairaj P. Mehta was the Managing Director. THEre were other relatives of Sri. Mehta in the Board.

(3.) THE Appellate Authority after carefully considering the case of the assessee and scrutinizing the documents produced upheld the order of the Income Tax Officer in dis-allowing the deduction of the said commission paid. Aggrieved by the same, the assessee preferred the appeal to the Appellate Tribunal. THE Tribunal on re-appreciation of the entire material on record, after referring to the judgments relied on, held the payment of this nature even if it is disclosed in their accounts cannot be allowed. THE payer induces the other party to deceive the shareholders. THE other party is a Public Limited Company. Even if it is treated as not an offence as such, within the meaning of the section, it clearly falls within the meaning of expenditure incurred, which is prohibited by law. THE directors of the Company are holding the post in trust. By making the payment, the payer induces the directors its shareholders. This amounts to an abatement of not only an unethical business practice but also amounts to abetting to commit a breach of trust by the directors of the recipient company which is clearly an offence prohibited by law. THE directors are holding the post in trust with regard to its shareholders. THErefore, it dismissed the appeal. Aggrieved by these order, the assessee is before the Court.