COMMISSIONER OF INCOME-TAX, BOMBAY versus M/S. WALCHAND & CO. (PVT.) LTD., BOMBAY

Citation: [1967] 3 S.C.R. 214 · Decided: 17-03-1967 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

COMMISSIONER OF INCOME-TAX, BOMBAY 
A 
v. 
M/S. WALCHAND & CO. (PVT.) LTD., BOMBAY 
March 17, 1967 
[J. C. SHAH, S. M. SIICRI AND V. RAMASWAMI, JI.] 
lndia11 Income-tax Act (11 of 1922), ss; 10(2)(xv) 
and 33(4)-
lncrease in Director's remuneration not reflected in assessee's profiJs-lf 
.allowable. 
Appellate Tribunal-Jurisdiction-Reasons in support of decision, if 
.11eces1ary. 
The Income-tax Officer disallowed the increase in the remuneratloa of 
the Directors and Officers of the asses9ee-company sinoe the increase was 
not reflected in the increase in the profits of the assessee and wo on 111at 
account not expenditure laid out wholly and exclusively for the purpoilel 
of the business under s. 10(2) (xv) of the Income-tax Act. The onl« was 
modified by the Appellate Tribunal. On reference the High Court IUUll'er· 
-ed the question aga:nst the Revenue, holding that the Tribunal acted with· 
•out evidence in partially disallowing 
the increase in respect of aierlain 
·officers, 
· 
In appeal to this Court, 
HEID : The appeal must be dismissed. 
The practice· of recording a decision without reasons· in support cannot 
but be severely deprecated. 
Though the Tribunal is not a Court, it is 
8 
c 
D 
invested with judic:al power to be exerci>ed in manner similar to the 
E 
•exerci>e of power of an appellate .Court acting under the Code of Clvil 
Procedure. 
Authority to ''pass such orders thereon. as it thinks fif' in 
·s, 33(4) of the Income-tax Act, 1922 is not arbitrary; 
the 
expression 
i9 intended to define the jurisdiction or the Tr:bunal to deal with and 
determine questions which arise out of the subject-matter of the appeal 
in the light of the evidence, and consistently with the justice of the case. 
Jn the hierarchy of authorities the Appellate Tribunal is the final 
fact-
finding body : :ts decioions on questions 
of fact are 
not liable to be 
F 
questioned before the High Court. 
[216H-217C) 
When a claim for allowance under s. 10(2) (xv) of the Income4ax 
Act is made, the Income-tax authorities 
have to decide whether the cx-
.PenditUre claimed as an allowance was incurred voluntarily and on grout!ds 
of comm·~rcial expediency. In applying the test of commercial expediency 
for detennining whether the expenditure was wholly and exclus"vely laid 
-0ut for the purpose of the business. reasonabJen-ess of the expenditure must 
G 
be adjudged from the point of view of the businessman and not of the 
Revenue. 
An ·~mployer in fixing the remuneration of his employees is 
·entitled to consider the extent of h:s. business, the nature of the duties to 
bo performed, and the special altitude of the employee, future prospects 
·of cXtension of the business and a host of o~her related circumstances. The 
rule that increased remuneration can only be justified if there be corres-
ponding increase in the profits of the employer 
is erroneous, 
[217F-
H 
218B] 
CIVIL APPELLATE JURISDICTH?N : 
Civil Appeals Nos. 279 
and 280 of 1966. 
I 
C.I.T. V. WAI.CHAND & CO. (Shah, J.) 
215 
A 
Appeals by special leave from the judgment and order dated 
September 4, 1962 of the Bombay High Court in Income-tax 
Reference No. 23 of 1961. 
B 
c 
D 
E 
F 
G 
H 
S. K. Mitra, T. A. Ramachandran, S. P. Nayyar for R. N. 
Saclzthey, for the appellant (in both the appeals). 
J. B. Dadachanji and 0. C. Mathur, for the respondent (in 
both the appeals). 
The Judgment of the Court was delivered by 
Shah, J. The respondent (hereinafter called 'the assessee') 
is a private limited Company registered under the Companies Act, 
1913. 
The assessee carries on the business of acting as Manag-
ing Agents for nine public limited Companies. 
The business of 
! he assessee was managed by three Directors. 
Each Director was 
paid a remuneration of Rs. 2,500 per month. 
The assessee lmd 
employed three executive officers to administer its affairs. 
By 
resolution dated July 9, 1952, the remuneration of each of the 
Directors of the assessee was increased with retrospective effect 
from April 1, 1952 by Rs. 1,000 per month and of two out of 
the three officers by Rs. 500 per month and of the remaining 
officer by Rs. 750 per month. In the year 1953 the remunera-
tion of each of the Directors was increased by Rs. 500 per month 
:md of each of the officers by Rs. 250 per month. 
In proceeding3 for assessment of income for the years 1953-54 
and 1954-55 the Income-tax Officer called upon the asscssee to 
show cause why the increase in the remuneration of the Di

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