T M RAGHUNATHAN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee, the Tribunal referred the following question for the opinion of this Court under s. 256(1) of the IT Act, 1961 :"Whether, on the facts and in the circumstances of the case, the assessee is liable to be assessed on the income of Rs. 25, 000 as remuneration from the company of which he was the managing director for the asst. yr. 1973-74 ?".

(2.) THE assessee is the managing director of Falcon Wires (P) Ltd. For the asst. yr. 1973-74, the financial year ending on 31st March, 1973, the assessee's remuneration was fixed at Rs. 2, 500 per mensem at a board's resolution, dt. 4th June, 1971. However, by another resolution, dt. 31st December, 1972, the remuneration was reduced for the period from 1st April, 1972 to 31st March, 1973, to Rs. 10, 000 per annum, in view of the company's difficult financial position. THE case of the assessee is that he is liable only on a sum of Rs. 10, 000 as per the latter resolution, dt. 31st December, 1972. He, therefore, offered only this amount of Rs. 10, 000 for assessment. THE ITO was of the view that the salary for the period from 1st April, 1972 to 31st December, 1972, has to be governed by the first resolution, which was, in his opinion, the only resolution in force during this period. While he accepted the salary of Rs. 10, 000 per annum for the last three months, he reckoned the salary at Rs. 2, 500 per mensem for the first nine months. THE ITO, therefore, computed the salary at Rs. 25, 000 for the year as against Rs. 10, 000 returned by the assessee.

(3.) ACCORDING to the assessee, in view of the latter resolution, dt. 31st Dec, 1972, salary was determined at Rs. 10, 000 per annum and the actual drawings of the assessee in the personal account of the company shows a sum of Rs. 12, 000 and, therefore, according to the assessee, this is the amount, which is chargeable to tax in the assessment year under consideration.