JAI SURGICALS LTD. Vs. ACIT

JUDGEMENT

(1.) THIS appeal by the assessee emanates from the order passed by the CIT (A) on 20.11.2012 in relation to the assessment year 2009 -10.

(2.) THE only issue raised in this appeal through various grounds is against the confirmation of addition of Rs. 41,24,129/ -. Briefly stated, the facts of the case are that the assessee is engaged in the business of manufacture and export of surgical blades. Note no. 6 to the Annual accounts, attached with the return of income, read as under: -

(3.) WE have heard the rival submissions and perused the relevant material on record. It is observed that the disallowance of Rs. 41.24 lac under consideration has been made in the light of the Explanation to section 37(1) of the Act, which came to be inserted by the Finance (No. 2) Act, 1998 with retrospective effect from 01.04.1962. The disallowance has been made on the premise that as on the date of making the payment to the related party, the assessee did not have the approval from the Company Law Board in accordance with the section 297 of the Companies Act. Before we embark upon considering the applicability of Explanation to section 37(1) of the Act, it would be apposite to consider the relevant parts of section 297 of the Companies Act, 1956, as under: -