1991 P T D 776
[Lahore High Court]
Before M. Mahboob Ahmad, C.J. and Malik Muhammad Qayyum, J
Messrs DUKE SPORTS LTD
Versus
THE C.I.T., RAWALPINDI
T.R. No.12 of 1978, heard on 06/05/1991.
Income-tax Act (XI of 1922)--
----S.66---Reference---Salary, partial disallowance of---Income Tax Officer partially disallowed the salaries of lady Directors of the company 'as these lady Directors did not possess necessary qualifications and business acumen especially when assessee had employed a considerable staff to look after the business-- Income Tax Tribunal upheld the order of Income Tax Officer partially disallowing the salaries of lady Directors---Question framed for reference regarding partial disallowance of salary, held, was essentially a question of fact not involving any point of law and had appropriately been adjudicated upon by the Tribunal and appeared to be unexceptionable and beyond the purview of jurisdiction of High Court.
Zia H. Rizvi for Petitioner.
M. Ilyas Khan for Respondent.
Date of hearing: 6th May, 1991.
JUDGMENT
M. MAHBOOB AHMAD, C.J.---This reference under section 66(1) of the Income-tax Act, 1922 has been made to this Court vide order of the Income Tax Appellate Tribunal, dated 30-6-1977. The question framed by the Income Tax Appellate Tribunal is as under:--
"Whether on the facts, and in the circumstances of the case the Tribunal was justified in maintaining the partial disallowance of salary of the lady Directors on the basis of the reasons assigned by the Income-tax Officer?"
2. The learned counsel for the department has submitted that the question as framed is a pure question of facts, and therefore, is not referable to this Court for answer.
3. The learned counsel for the petitioner with reference to the order of the Income Tax Officer submitted that the Income Tax Officer erred in law in holding that the female Directors do not possess necessary qualification and business acumen to conduct the affairs of the company especially when the assessee has employed a considerable staff to look after the business. He submitted that employment of staff other than Directors cannot be made the basis for disallowing the salary of the Directors.
4. The learned counsel for the department with reference to the order of the Income Tax Appellate Tribunal contended that reduction in the salary of the female Directors is well-based in view of the discussion in the order of the learned Income Tax Appellate Tribunal, dated 22-4-1975 in which order the order of the Income Tax Officer has merged.
5. Having given consideration to the respective contentions of the learned counsel for the parties, we are clear in our mind that the question as framed essentially is a question of facts and involves no point of law, which need an answer by this Court. While reducing the salaries of female Directors, the Income Tax Officer inter alia observed as under:--
"The contention of the assessee cannot be wholly accepted. In spite of assessee's assertion, the lady directors are not capable of handling the work of the company in the absence of male directors that is why the assessee has employed a considerable staff to look after the business. Secondly, educational qualifications and business experience of the lady directors do not warrant such huge salaries. 4ecause of these reasons salaries of lady directors are curtailed to following."
6. Similarly when the matter came up before the learned Income Tax Appellate Tribunal, it by its order dated 22-4-1975 held as under:--
"We now take up the last objection which concerns the disallowance of a part of the salaries paid to the three female directors as excessive and unjustified by business considerations. The relevant facts here are that three female directors were previously the partners in the registered firms, which were later merged and converted into a private company in the year of account. One of the ladies was a graduate and the others were only matriculates and they were reportedly employed on such duties as custody of cash, internal auditing and signing of bank cheques etc. The graduate director was paid @ Rs.1500 per month while the remaining two were paid @ Rs.2,000 per month. The Income Tax Officer after detailed consideration of their qualifications as well as the duties reportedly assigned to them came to the conclusion that the underlying consideration predominantly was extra commercial and finally allowed a salary of Rs.600 per month or Rs.5,400 were each director and wrote-back the balance as actuated by the consideration other's business.
The learned authorised representative despite best efforts could not displace the Income-tax Officer's findings in this behalf and was unable to show that the salaries paid to them were in fact justified by the duties reportedly assigned to them. On this factual position we find ourselves unable to interfere and hold that the Income-tax Officer was justified in reducing their salaries to the extent warranted by the nature and extent of work performed by them. The appellant would consequently fail on this issue."
7. The observations from the order of the learned Income Appellate Tribunal as reproduced hereinabove are all based on controversy of facts and to our mind have been appropriately adjudicated upon and appear to be unexceptionable.
8. Apart altogether from the validity of observations of the learned Income Tax Appellate Tribunal, the matter m the perspective m which the learned counsel for the petitioner wants us to discuss is beyond the purview of jurisdiction of this Court as vested in it by section 66 of the Income Tax Act, 1922.
9. In view of the foregoing discussion, we do not think that the question as framed is a question of law which would need any answer from this Court.
10. The reference stands disposed of in terms of the above order.
11. There will be no order as to costs.
Z.S:/D-77/L Reference disposed of.