S SRINIVASAN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee is the managing director of a private limited company called Anjaneya Motor Transports (Private) Ltd., Erode. THE assessment for the previous year ending on September 30, 1961, relevant to the accounting year 1962-63, was completed on January 15, 1963, on an income of Rs. 51, 935.In the assessment of the private limited company for the previous year ending on September 30, 1961, the company claimed a sum of Rs. 745 as mess expenses. Considering that the expenses related to that of the directors during their trips to Madras, the Income-tax Officer disallowed a sum of Rs. 200. In respect of another sum of Rs. 3, 489 claimed by the company as travailing expenses incurred in respect of the visit of the managing director to Russia, the Income-tax Officer was not prepared to consider it as a business expenditure and accordingly disallowed that item as well. When the business which was originally a partnership was converted into a private limited company all the partners became shareholders. THEre was an agreement on December 31, 1959, to the effect that the amount outstanding from the partners would be recouped from the amounts payable by the company in the subsequent years without payment of any interest.

(2.) THE total of the debit balance in the accounts of the shareholders amounted to Rs. 2, 06, 899 the total liabilities of the company was Rs. 20, 95, 415 and it had paid by way of interest Rs. 1, 15, 511. THE Income-tax officer disallowed a sum of Rs. 11, 551. A is representing the proportionate interest on the debit balance in the accounts of two directors, one of whom was the assessee. One other item which was disallowed by the Income-tax Officer was a sum of Rs. 566 spent by the company in respect of the motor car used by the managing director in the view tha : it related to the personal use of the assessee. THE assessment on the company was completed on these lines on November 26, 1962. THE company preferred an appeal against the disallowance of all these items, except the sum of Rs. 566 claimed towards expenditure on the motor car used by the managing director. THE Appellate assistant commissioner, allowed the sum of Rs. 200 and Rs. 11, 551 but confirmed the disallowance of Rs. 3, 489.