Judgement

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 Managing Agents for nine public limited Companies. The business of the assessee was managed by three Directors. Each Director was paid a remuneration of Rs. 2,500 per month. The assessee had 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 remuneration of each of the Directors was increased by Rs. 500 per month and of each of the officers by Rs. 250 per month.

2. In proceedings for assessment of income for the years 1953-54 and 1954-55 the Income-tax Officer called upon the assessee to show cause why the increase in the remuneration of the Directors and officers should not be disallowed in the computation of the taxable income of the assessee. The assessee submitted that the managed Co