COMMISSIONER OF INCOME TAX Vs. RAJENDRA MILLS LIMITED

JUDGEMENT

(1.) THE assessee in this case is a public limited company carrying on business in the manufacture and sale of yarn. Its managing agents are M/s. Thiagaraja Chetty and Company Ltd. One M. S. Chocka-lingam Chettiar was the secretary of the company till first November 1, 1959. From first November, 1959, he was appointed as general manager of the assessee-company by the board of directors to be in overall charge of the mills. THE remuneration paid by the company to the said Chockalingam Chettiar as general manager for the years ending March 31, 1960, March 31, 1961, arid March 31, 1962, relevant for the assessment years 1960-61, 1961-62 and 1962-63 were Rs. 14,706, Rs. 31,875 and Rs. 31,875, respectively. His salary as secretary up to October 30, 1959, was included in the remuneration of the managing agents. THE assessee-company claimed the above amounts paid as remuneration to the said general manager after November 1, 1959, as expenditure coming under Section 10(2)(xv) of the Indian Income-tax Act, 1922 (hereinafter referred to as "the Act"), corresponding to Section 37 of the new Act.

(2.) THE Income-tax Officer, however, disallowed the same holding that it was not a payment authorised under Section 360 of the Companies Act, 1956, as the appointment of Chockalingam Chettiar as general manager had not the requisite approval of the general body or of the Central Government. He rejected the assessee's contention that the payments had been authorised by the directors which could in law be either validated, approved or ratified by the general body.

(3.) THE reference is, therefore, answered in the affirmative and in favour of the assessee. THE assessee will be entitled to its costs from the revenue, Counsel's fee, Rs. 250.