VEERAIAH REDDIAR S Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS reference comes to us under section 66(1) of the Indian Income-tax Act, with the following question :

(2.) THE assessee had claimed Rs. 36,000 as deduction due to the amount having been paid as salary to Lakshmana Reddiar, the general manager, for the previous year for the assessment year 1951-52. THE Income-tax Officer had allowed only Rs. 20,000 and disallowed the rest, but the Appellate Assistant Commissioner allowed the whole. His reasons for doing so were that there was an agreement between the assessee and the manager about the latter getting 1/3rd of the profit or suitable salary; that the manager had in the earlier years been getting 1/3rd of the profits but in 1124 M. E. there was a loss, that the manager thereafter relied on his alternative right of being given fixed salary, which was fixed at Rs. 3,000 and paid, and that in the circumstances it would not be reasonable to decide what would be reasonable salary. THE Appellate Tribunal has reversed the decision, and the ground for doing so can shortly be given in the words of the Tribunal itself;