The disallowance of remuneration and perquisite to the managing director suffering from physical handicap was justified.

( 1 ) THE assessee. Reform Flour Mills (Pvt.) Ltd. ; Calcutta, has initiated this reference under Section 66 (2) of the I. T, Act, 1922. As directed by this court, the Tribunal has referred the following question:" Whether, on the facts and in the circumstances of the case, the disallowances made in the year 1960-61, under Section 10 (4a) of the I. T. Act, 1922, in respect of the sum of Rs. 12,000 being a part of the remuneration paid and a sum of Rs. 4,500 being the value of the free furnished accommodation provided for the managing director, Sri Mahabir Prasad Jatia, was right in law ? "

( 2 ) THE facts found and/or admitted in this reference are, inter alia, that the assessee is a private limited company. The assessment year involved is 1960-61. The corresponding previous year is the year ended 31st December, 1959. Under a resolution dated the 3rd October, 1959, Mahabir Prasad Jatia and G. D. Jatia were appointed the joint managing directors of the assessee with effect from the 1st October, 1958, for a term of 5 years. They were sanctioned remuneration of Rs. 3,000 per month each and in addition were provided with free furnished accommodation, which were valued at Rs. 4,500 each.

( 3 ) IT is found that Mahabir Prasad Jatia at the relevant time suffered from a serious physical handicap in that he had an almost totally impaired vision.

( 4 ) IN the assessment, the ITO disallowed the entire remuneration paid to Mahabir Prasad under Section 10 (4a) of the I. T. Act, 1922, and also added back a sum of Rs. 4,500 as vaule of the rent-free furnished accommodation provided for Mahabir Prasad. He held that by reason of the said physical handicap Mahabir Prasad could not have rendered any service to the assessee.

( 5 ) FROM the assessment an appeal was preferred by the assessee to the AAC, who confirmed the assessment of the ITO. A further appeal was preferred by the assessee to the Tribunal.

( 6 ) THE Tribunal considered the evidence on record and came to the conclusion that Mahabir Prasad was actively engaged in looking after the affairs of the assessee even though under a handicap. The Tribunal found that in the capacity of a joint managing director it was possible for Mahabir Prasad to render valuable service, and held that the total disallowance of the remuneration and the perquisite by way of. free furnished accommodation could not be justified in these facts and circumstances.

( 7 ) THE Tribunal next considered what remuneration would be adequate and reasonable for Mahabir Prasad, having regard to the business needs of the assessee and the benefits derived by the assessee from the latter's appointment. The following facts were found and considered. (a) The same amount of remuneration was being paid to the other joint managing director, G. D. Jatia, actively engaged in looking after the affairs of the company. (b) The turnover for the year in question aggregated Rs. 1,85,24,105 and the net profit was shown at Rs. 8,84,952. (c) The business of the assessee, viz. , flour milling was under Government control, but a major part of it was in respect of free sales. (d) The part of the business under Government control involved a lot of complicated work.

( 8 ) THE Tribunal found that it was not possible for G. D. Jatia, the other managing director" alone to handle all the work and that the other managing director, Mahabir Prasad, was not merely a dummy and his services were in fact required by the assessee. The Tribunal considered a statement of the assessee giving particulars of the work performed by Mahabir Prasad.

( 9 ) ON such facts and evidence, the; Tribunal found that the services of Mahabir Prasad could not be at par with those of G. D. Jatia, and the same did not entitle Mahabir Prasad to the entire remuneration and pre-quisite claimed.

( 10 ) THE Tribunal also noted that the directors and their relatives were exercising control over the assessee and as such observed that the remuneration was being