Mahindra And Mahindra Ltd. vs Commissioner Of Income-Tax
2005 Latest Caselaw 988 Bom

JUDGMENT

1. By this reference under Section 256(1) of the Income-tax Act, 1961, the Income-tax Appellate Tribunal has referred the following questions of law arising out of the order passed for the assessment year 1984-85 for the opinion of this Court :

" (1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the disallowance of the Income-tax Officer of a sum of Rs. 70 lakhs which is the premium the assessee had to pay on the debentures issued by it to the public for subscription at the time of their redemption and in allowing the amount to be spread over 7 years from the issue to redemption of the debentures ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the disallowance of Rs. 1,46,027 being the remuneration paid to the director during the year without the sanction of the Central Government ?"

2. Learned Counsel appearing for the applicant-assessee submits that the applicant is not interested in pressing the first question. Accordingly, the first question hereinabove is returned unanswered.

3. So far as the second question is concerned, it relates to disallowance of Rs. 1,46,027 being remuneration paid to the director during the year without sanction of the Central Government. It is brought to our notice that the sanction was kept pending since there was a challenge to the guidelines framed by the Central Government under the provisions of the Companies Act and the said guidelines were struck down by the Delhi High Court against which the special leave petition was filed by the Union of India which was granted and converted into Civil Appeal No. 2272 of 1980. By the time the matter came for decision before the Supreme Court, fresh guidelines were issued. In that view of the matter, the learned Additional Solicitor General appearing for the Union of India, made a statement before the Supreme Court that in the case of Mahindra and Mahindra all applications pending for grant of approval would be deemed to have been approved; in which the quantum of remuneration paid or payable did not exceed the 1969 guidelines. The hon'ble Supreme Court recorded this statement made by the learned Additional Solicitor General and in view of the statement made, the court disposed of the civil appeal referred to here in above by order dated May 9, 1999.

4. The Government of India, after disposal of the aforesaid civil appeal in view of the order of the Supreme Court, by letter dated July 29, 1994, communicated its approval to the pending proposal of the assessee Mahindra and Mahindra, which also contained approval to the pending proposal of Mr. B. R. Sule as managing director for a period of five years with effect from November 1, 1980 to October 31, 1985.

5. This approval to the proposal of Mr. B. R. Sule would, obviously, relate back to the date of application made for that purpose. In view of this subsequent event, the question referred will have to be answered in favour of the assessee. It is no doubt true that on the date when the Tribunal decided the appeal filed by the assessee, the view taken by it was a justified view, however, in view of the subsequent event, the view held by the Tribunal cannot be said to be good. In this scenario, the said question referred is answered in the negative, i.e., in favour of the assessee and against the Revenue.

6. Reference accordingly stands disposed of with no order as to costs.