BALAKRISHNAN A R Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE petitioner, A. R. Balkrishnan, is the son of one A. H. s. Ramaswami, who was a shareholder and also the Managing Director of a private limited company, styled the Balakrishna Mills Ltd., East Gate, Madurai. As per the Articles of Association of the company, and the resolution of the directors dated 29-6-1946 and which was approved by the General Body at its meeting on 14-4-1947, Ramaswami was entitled to a monthly salary of Rs. 1500 besides a commission calculated at 10 per cent of the net profits. For the assessment years 1949-1950 and 1950-51, with which we are now concerned, the company was assessed to income-tax and in respect of those years, the company claimed that they were entitled to deduct the salary and commission paid to Ramaswami as per the resolution of the company referred to above.

(2.) AGAINST the order of the Income-tax Officer disallowing the claim on behalf of the company, there was an appeal to the Appellate Assistant Commissioner, who followed the order of the Appellate Assistant Commissioner, which was confirmed by the Appellate Tribunal, in respect of the assessment year 1948-1949, in which the same question was decided adversely to the assessee, that is, the company. The basis on which the Appellate Assistant Commissioner confirmed the assessment order in respect of the year 1948-1949 was that the commission was practically a distribution of the profits to the Managing Director under the guise of commission on profits, and this view was confirmed by the Appellate Tribunal. AGAINST the orders of the Appellate Assistant Commissioner for the assessment years 1949-1950 and 1950-51, there was apparently no appeal to the Appellate Tribunal. So, from the orders of the department it is clear that the disallowance of the commission claimed as deduction on behalf of the company throughout has been on the footing, that it was really a distribution of the profits by the company to the Managing Director, and, there? fore, was not a permissible deduction.

(3.) FOR these reasons we think that the application must be allowed and the Commissioner of Income-tax directed to restore the petition to his file and dispose it of according to law. As the petitioner has succeeded in this Court, he is entitled to his costs, which we fix at Rs. 250.