COMMISSIONER OF INCOME TAX Vs. NAGESH CINE ENTERPRISES

JUDGEMENT

(1.) AS per the directions given by this Court, the Tribunal referred the following questions for the opinion of this Court under s. 256(2) of the IT Act, 1961, for the asst. yrs. 1972-73, 1973-74 to 1975-76, respectively :

(2.) THE assessee is a partnership firm engaged in the business of distribution and exploitation of motion pictures, production of cine-films, exploitation of talents of film stars and such other business that may be suitably felt from time to time. On 20th April, 1971, the assessee entered into an agreement with Shri Nagesh and one of the terms of the said agreement was that the assessee had to provide him a secretary, make-up man and a special attendant. In pursuance of this agreement, the assessee appointed Mrs. Regina Nagesh as his secretary and paid her a salary of Rs. 1,520 per month. Tax was deducted at source and the salary received by her was assessed in her hands. However, the ITO was of the opinion that the firm itself was only a device by which the income of Shri Nagesh was sought to be diverted, among different persons and that the income shown by the firm was the income of Shri Nagesh himself and it had to be assessed in his hands. THErefore, the ITO proceeded to make an assessment on the firm only as a protective measure and in that assessment he held that in the absence of evidence, the amount paid to Mrs. Regina Nagesh had to be added back in computing the income from the business.