SUHAS CHANDRA SEN, J.

( 1 ) THE assessee has sought for reference of as many as three questions but the Tribunal has referred only one question which was not exactly in terms of the language of the three questions raised by the assessee. The Tribunal has reframed the question and this question covers the entire controversy in this case. The question referred by the Tribunal under Section 256 (1) of the Income-tax Act, 1961, to this court is as follows :"whether, on the facts and in the circumstances of the case and on a correct interpretation of the provisions of Section 40 (c) (i) of the Income-tax Act, 1961, the Appellate Tribunal was right in upholding the disallowance of Rs. 1,13,000 being the excess over the limit of Rs. 72,000 laid down in the aforesaid provisions of the Act ?"

( 2 ) THE facts of the case as found by the Tribunal have been stated as under :"the assessee is a company and the relevant assessment year is 1972-73. The corresponding accounting period ended on March 31, 1972. The assessee regularly maintained accounts on the mercantile system. In the course of the relevant assessment proceedings, the Income-tax Officer noticed that the assessee-company paid commission to Sri M. L. Jalan in accordance with the resolution of the board of directors dated July 13, 1970, by debiting miscellaneous expenses in respect of the cotton mill section by Rs. 70,000 and in respect of the jute mill section by Rs. 1,15,000. According to the resolution, Sri Jalan was paid guarantee commission with effect from April 1, 1969, at the rate of 1% in each financial year of the company upon the maximum amount so guaranteed by him. Shri M. L. Jalan is the father of Shri T. R. Jalan, director of the assessee-company. In view of the provisions of Section 40 (c), the Income-tax Officer restricted the claim to Rs. 72,000 and disallowed the balance of Rs. 1,13,000 in the assessment. Before the Appellate Assistant Commissioner, it was contended that Shri M. L. Jalan, who was one of the guarantors to the State Bank of India for cash credit facilities extended by the bank to the assessee-company, was not in any way remunerated by the assessee-company and, therefore, the claim did not fall for consideration under Section 40 (c ). This was rejected by the Appellate Assistant Commissioner who upheld the disallowance. "

( 3 ) WHEN the case went to the Tribunal on appeal, the Tribunal held as follows :"we have heard both sides. In fact, there are two guarantors, namely, Shri

M. L. Jalan and Shri C. L. Bajoria. Shri Bajoria did not ask for any guarantee commission nor was he paid any. No doubt, the assessee incurred an expenditure because of payment of guarantee commission to Shri M. L. Jalan. It is not necessary that only remuneration would come for consideration under Section 40 (c ). As a matter of fact, any expenditure which results directly or indirectly in the provision of any remuneration or benefit or amenity to the concerned person would fall for consideration under Section 40 (c ). In this case, no doubt, Shri M. L. Jalan was benefited by the expenditure incurred by the assessee-company. Therefore, the limit of allowance of Rs. 72,000 would immediately be applicable and the authorities below were right in so applying it to the instant expenditure. In this context, we do not find any reason to interfere with the Appellate Assistant Commissioner's decision in the matter. "

( 4 ) THE relevant portion of Section 40, Sub-clause (c), is as under :"40 (c) in the case of any company-- (i) any expenditure which results directly or indirectly in the provision of any remuneration or benefit or amenity to a director or to a person who has a substantial interest in the company or to a relative of the director or of such person, as the case may be ;. . . "

( 5 ) THE section will be applicable in a case where the expenditure relates directly or indirectly in the provision of any remuneration or benefit or amenity to a person substantially interested in

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