Judgment Ajit K. Sengupta, J. 1. IN this reference under Section 256(2) of the Income-tax Act, 1961, for the assessment years 1981-82 and 1982-83, the following questions have been referred to this court : "1. Whether the findings of the Tribunal that (a) the salaries paid to the directors were excessive considering their qualifications and services rendered by them, and (b) the salaries paid to them were excessive having regard to the business needs of the company are supported by any evidence ? 2. WHETHER the judgment of the Tribunal is vitiated by reason of its findings that the profits of the business in the assessment year 1981-82 was less than in the assessment year 1979-80, which finding is perverse being contrary to evidence ? Whether the determination of the remuneration of the directors by the Tribunal was in accordance with law ? 3. WAS the Tribunal justified in determining the total remuneration of the directors having proceeded only on the basis of the salaries?" 2. Shortly stated, the facts of the case are that the assessee is a closely-held company which was incorporated on April 6, 1979. The shareholders of the company are the four directors and their respective wives. Prior to the formation of the said company, the directors were partners of the firm styled "Sonar Airotech Co." which came into existence on January 1, 1974. The partnership business was taken over as a going concern by the assessee-company in terms of an agreement dated August 8, 1979. The business which the firm carried on was the same as that of the assessee-company, namely, the manufacture and sale of sophisticated plant and instruments required in various major industries for air handling and gas treatment plants as well as pollution control equipment. The dispute in this case pertains to the disallowance of a part of the directors' remuneration in respect of the assessment years 1981-82 and 1982-83. There were in all four directors who were employed on wholetime basis in the assessee-company. These directors were also employed in the erstwhile partnership firm. The details regarding the names of the directors, their qualifications, the monthly remuneration paid by the assessee-company and the monthly remuneration drawn by them as partners of the erstwhile firm are given by the Tribunal. There were in all four directors who were employed on wholetime basis in the assessee-company. These directors were also employed in the erstwhile partnership firm. The details regarding the names of the directors, their qualifications, the monthly remuneration paid by the assessee-company and the monthly remuneration drawn by them as partners of the erstwhile firm are given by the Tribunal. These are as under : Assessment Previous Turnover Directors' remuneration year year Profit before tax as per P& L A/c Rs.(in lakhs) Rs.(in lakhs) Rs.(in lakhs) 1981-82 1-7-1979 to 30-6-1980 34.23, 2.59, 2.41 1982-83 1-7-1980 to 30-6-1981 31.61, 2.41, 2.34 3. The directors during these two years were paid the following salary: Names of the Monthly Monthly salary paid by directors Qualification remuneration the partnership firm as on 30-6-1979 Rs. 5,000 Rs. 3,600 Sri B.K.Sengupta Diploma in Engg. Sri L.V.Haldipur B.E. 4,500 2,500 Sri V.M.Rodgers Diploma in Draftsmanship 4,500 2,150 Sri K.C.Naha Boiler licence-holder (BOAT) 4,500 2,000 4. The Tribunal also found that the turnover of the business, the quantum of remuneration paid to the directors and the profits before tax for the relevant years were as under : Assessment year Turnover Aggregate of directors' remuneration 1975-76 4.5 0.46 1976-77 11.01 1.00 1977-78 0.13 1.13 1978-79 11.70 1.23 1979-80 19.51 1.23 1980-81(6 months only) 11.79 0.62 1981-82 34.23 2.59 1982-83 31.61 2.41 4. ACCORDING to the Tribunal, the remuneration fixed for the directors was excessive considering the qualification of the directors as also the services rendered by them. The Tribunal noted that for similar type of work and with similar qualification every director drew much less salary in the erstwhile partnership firm. The Tribunal also found that although there had been an increase in the turnover of the business during the previous year relevant to the assessment years 1981-82 and 1982-83, the profits shown were less than the profits disclosed in the previous year relevant to the assessment year 1979-80. The Tribunal, therefore, held that the remuneration paid by the assessee-company to its directors was excessive having regard to the business needs of the assessee-company. The Tribunal, therefore, held that the remuneration paid by the assessee-company to its directors was excessive having regard to the business needs of the assessee-company. Taking an overall view of the matter the Tribunal considered it reasonable to allow directors' remuneration for the two years under reference as under: Rs.(per month) Sri B.K. Sengupta 4,500 Sri L.V. Haldipur 3,500 Sri V.M. Rodgers 3,250 Sri K.C. Naha 3,000 It is by now well-settled that the Tribunal cannot adopt a subjective standard of reasonableness of the increase in remuneration and disallow a part of the increase in the directors' remuneration on the ground that it is unreasonably large. The reasonableness of the remuneration has to be considered from the point of view of a businessman and it was not open to the Tribunal to adopt a subjective standard with regard to the proper remuneration which should be paid to its directors. 5. IT has been observed in Newtone Studios Ltd. v. CIT [1955] 28 ITR 378 (Mad), that the Income-tax Officer should not take an armchair view of the management of the company and decide in his opinion what was the reasonable remuneration for a director and disallow such part of the remuneration as he considered excessive or unreasonable. What applies to the Income-tax Officer equally applies to the appellate authorities including the Appellate Tribunal. IT has been held in Patiala Biscuit Manufacturers P. Ltd. v. CIT MANU/PH/0079/1975, that appeals are in continuation of the original proceedings and, therefore, the opinion formed by the Tribunal on the matter coming up in appeal before it is subject to the same restraint as fetters the subjectivity of the Assessing Officer's judgment. In this case, the Tribunal has just reduced the remuneration to arbitrary amounts at its pleasure and free will without any intelligible ratio. In one case, the remuneration is reduced by a mere Rs. 500 per month, in another by Rs. 1,000 per month and in yet another by Rs. 1,250 and in the fourth case by Rs. 1,500. Thus, the reduction has gone in an escalating order from Rs. 500 to Rs. 1,500 per month, The Tribunal has not given any inkling as to how its mind worked in administering such reductions substituting its judgment for the commercial judgment of the assessee. 1,250 and in the fourth case by Rs. 1,500. Thus, the reduction has gone in an escalating order from Rs. 500 to Rs. 1,500 per month, The Tribunal has not given any inkling as to how its mind worked in administering such reductions substituting its judgment for the commercial judgment of the assessee. The Tribunal has admitted that the directors deserved more than what they had received as the partners of the erstwhile firm but at the same stroke has drawn margins of excessiveness. Nothing has been brought on record showing what measuring rod was to be had to draw the margins. The margin drawn is arbitrary and without a nexus with any materials affording a basis. 6. THERE is one more factual inaccuracy that vitiates the Tribunal's decision. The allegation that has weighed with the Tribunal very heavily is that the profit shown for the assessment year 1981-82 is less than the profit disclosed by the same unit as a partnership firm for the assessment year 1979-80. This is contrary to the facts brought out by the first appellate authority which clearly indicate that the profit for the assessment year 1979-80 was Rs. 3,17,590 while the aggregate salary paid to these very directors as the erstwhile partners was Rs. 1,22,000, the profit to the exclusion of the partners' remunerations being around Rs. 1.96 lakhs. The assessee-company's profit for the instant assessment years was Rs. 2.41 lakhs and Rs. 2.54 lakhs (after reduction of the directors' remuneration) for 1981-82 and 1982-83, respectively. On the contrary the income of the erstwhile firm in the assessment year 1979-80 after payment of the remuneration to these very directors as partners was in the neighbourhood of Rs. 1,96,000. This actually belies the Tribunal's observation that the profit shown by the assessee-company for the assessment year 1981-82 is less than the profit disclosed by the erstwhile partnership for the assessment year 1979-80. Thus, the Tribunal proceeded from a wrong premise on the facts apart from exceeding the bounds of it" power to disallow any part of the salary paid to the directors under Section 40(c) of the Act. Thus, the Tribunal proceeded from a wrong premise on the facts apart from exceeding the bounds of it" power to disallow any part of the salary paid to the directors under Section 40(c) of the Act. Of course, the business needs of the company and the benefit derived by or accruing to it and the reasonableness of the remuneration in that perspective are to be doubtless put to the test but in a manner totally objective and uninfluenced by any obsession for higher tax revenue. Yet the burden lies on the assessee to prove that a particular allowance is justifiable. The company has to establish that the amount was for purposes of business and was authorised by Section 40(c). The question that we have to address ourselves to is whether that burden has been discharged by the assessee-company. The manner in which the assessee discharged that burden, in our view, is by showing the quality of the expertise and experience of the directors and the benefit derived by the company attracting impressive custom. The Tribunal has blindfold applied the magnitude of the profit as the only yardstick to gauge the benefit derived by or accruing to the company, losing sight of the other aspects of the case, namely, that the company has substantially increased its turnover and that such uppish curve of the turnover has largely been due to the efforts and long experience of the directors that the assessee-company is engaged in manufacture and sale of highly sophisticated plant and instruments and in the light of that fact that the sharp climb in turnover holds out high potential for the company. 7. IN this case one indisputable aspect is that the directors who had received the remuneration are men of substantial experience and their services were effective to spur the turnover of the assessee-company and also, to a lesser degree, its profits. The last fact the Tribunal has however overlooked and also let itself be misinformed as we have already noted. 8. IN Calcutta Art Studio (Pvt.) Ltd. v. CIT [1979] 118 ITR 752, this court held that it is elementary that a business is benefited by the services of its experienced directors or employees. The directors run the business of the company and if they are experienced in business, their experience cannot be ignored in considering the legitimate business needs of the company. The directors run the business of the company and if they are experienced in business, their experience cannot be ignored in considering the legitimate business needs of the company. IN this case, it bears repetition to say that, it has been found as a matter of fact by the Tribunal as well as by the lower authorities that each of the four directors had long experience. They were also employed in Flakt India Ltd. Since January, 1971, they were the partners of the firm styled "Sonar Airotech Co.", whose business was ultimately taken over as a going concern by the assessee-company in terms of the agreement dated August 8,1979. It was nobody's case that the services of these four directors were not required by the assessee-company. The legitimate business needs of the company must be considered not as a tax collector but as a prudent businessman before disallowing any part of the remuneration paid to them. The finding of the Tribunal was that the turnover had vastly increased. It was clearly noted by the Tribunal that the turnover of the business was Rs. 19.51 lakhs in the previous year relevant to the assessment year 1979-80, whereas during the two years under reference the turnover had gone up to Rs. 34.23 lakhs and Rs. 31.61 lakhs, respectively. The Tribunal disallowed a part of the remuneration paid to the directors only on account of smallness of profits. We have expressed some reservation about that finding on the basis of facts before us. But it is now well-settled that profit or loss is not the sole relevant consideration under Section 40(c)(i) of the Income-tax Act, 1961, for it uses the expression "the benefit derived by or accruing to it therefrom"; the word "benefit" means benefit derived by the company or accruing to it from the services of a person specified in the section. The word benefit is a word of the widest amplitude incapable of delimitation and by no means is delimitable by measure of profit alone. Profit may be one of the indicia but not the sole one. Profit may not be at all a material consideration in the start-up or the nursery period of the business. The profit being the ultimate goal, the strategic target may not be, however, the practical aim in a year or years. Profit may be one of the indicia but not the sole one. Profit may not be at all a material consideration in the start-up or the nursery period of the business. The profit being the ultimate goal, the strategic target may not be, however, the practical aim in a year or years. Further, profit is a perpetual variable, an immeasurable uncertainty ; profit or loss depends on various factors. There may be a huge profit in one year and similarly a huge loss in another. No part of the remuneration or salary can be disallowed merely on the ground that the company has suffered a huge loss in an accounting year. It cannot be said that the provisions of Section 40(c) authorise the taxing authorities to vary the remuneration with every fluctuation of profit to which profit elementally is prone to. 9. HAVING regard to all the facts and circumstances of this case, we are of the view that the Tribunal's findings that the salaries paid to the four directors were excessive are perverse. We accordingly, answer questions Nos. 1, 3 and 4 in the negative and question No. 2 in the affirmative and all in favour of the assessee. There will be no order as to costs.