JUDGMENT P.A. Mohammed, J. 1. This Income Tax Reference came up before us at the instance of the assessee known as 'The Khaders International Constructions Ltd.' The questions referred to us for answer are the following: (1) Whether on the facts and the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that the remuneration paid to the Managing Director in Libyan Dinars for services rendered in Libya and as approved by the Central Government is covered by S.40(c)(1) of the Income Tax Act, 1961 and the rupee equivalent of the payment of remuneration in foreign currency in excess of Rs. 72,000 is to be disallowed? (2) Whether the Income Tax Appellate Tribunal was right in having held that the rupee equivalent of the remuneration paid to the Managing Director in Libyan Dinars and incorporated in the accounts of the company is to be disallowed to the extent it is excess of Rs. 72,000 even if there is no finding that such remuneration was excessive? (3) Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that the appellant was not entitled for weighted deduction under S.35B of the Act for the following expenses incurred: (a) Expenditure on travel outside India Rs. 1,16,551.68 (b) Expenditure for travel of employees from Libiya to India (Repatriation Expenses) 9,34,916.81 (c) Mobilisation expenses for travel of employees from India to Libiya 1,40,073.01 (d) Postage expenses at the Branch office outside India 1,84,846.39 (e) Revenue and Court fee at the Branch office outside India 19,260.14 (f) Printing and Stationery at the Branch office outside India 44,563.68 (g) Translation charges at the Branch office outside India 1,49,380.92 (h) Registration charges at the Branch office outside India 46,522.64 (h) Registration charges at the Branch office outside India 46,522.64 (i) Service charges at the Branch office outside India 3,12,533.89 2. The assessee is a company in which the public are not substantially interested. It engaged in construction work in Libya. In respect of the assessment year 1983-84, the assessee filed a return on 23rd September 1983 declaring a loss of Rs. 66,03,647 inclusive of carried forward losses. It claimed an amount of Rs, 4,67,124 as remuneration paid to the Managing Director who was posted at Libya. It engaged in construction work in Libya. In respect of the assessment year 1983-84, the assessee filed a return on 23rd September 1983 declaring a loss of Rs. 66,03,647 inclusive of carried forward losses. It claimed an amount of Rs, 4,67,124 as remuneration paid to the Managing Director who was posted at Libya. With regard to this claim, the Income Tax Officer found the allowable amount of remuneration was only Rs. 72,000 for the whole year. Therefore, the claim for balance salary of Rs. 3,93,430 paid to Managing Director was disallowed. As far as the weighted deduction under S.35B of the Income Tax Act, the Income Tax Officer rejected the said claim of the assessee on the ground that the expenses are strictly related to the construction work undertaken in Libya and therefore of the nature described in S.35B(1)(b)(i) or (iv) or (viii). In appeal, the Commissioner of Income Tax (Appeals) fixed the correct amount of disallowance of salary as Rs. 5,60,919 instead of Rs. 3,93,430 fixed by the officer. He further confirmed the action of the Income Tax Officer with regard to the claim under S.35B. In further appeal by the assessee, the Tribunal allowed the claim of the assessee only in respect of the office rent and rejected the other claims under S.35B. As far as the payment of salary to the Managing Director, the view taken by the assessing authority had been confirmed by the Tribunal. 3. The main dispute in this reference is with regard to the remuneration paid to the Managing Director. From the assessment order it is revealed that the assessee was paying a salary of Rs. 4,69,430 to the Managing Director. The Income Tax Officer found that the maximum salary payable under S.40(c) to a Managing Director is Rs. 76,000 and therefore he disallowed the balance salary of Rs. 3,93,430. According to the Commissioner of Income Tax (Appeals) the provision which would be applicable is S.40(a)(iii). Anyway, the assessee has no such case before the Tribunal. On behalf of the assessee it was contended that the Managing Director who received the salary has been assessed in the status of nonresident since he was living outside India and salary has been paid in foreign currency outside India. The consequence of this contention is S.40(a)(iii) has no application in this case. 4. On behalf of the assessee it was contended that the Managing Director who received the salary has been assessed in the status of nonresident since he was living outside India and salary has been paid in foreign currency outside India. The consequence of this contention is S.40(a)(iii) has no application in this case. 4. The next question required to be considered is whether the order of the Tribunal can be justified in view of the provisions contained in S.40(c) of the Income Tax Act. The relevant portion of the said provision is as follows: "40. Amounts not deductible. The consequence of this contention is S.40(a)(iii) has no application in this case. 4. The next question required to be considered is whether the order of the Tribunal can be justified in view of the provisions contained in S.40(c) of the Income Tax Act. The relevant portion of the said provision is as follows: "40. Amounts not deductible. Notwithstanding anything to the contrary in S.30 to 39, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gainsof business or profession x x x x (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; (ii) any expenditure or allowance in respect of any assets of the company used by any person referred to in sub-clause (i) either wholly or partly for his own purposes or benefit, if in the opinion of the Income Tax Officer any such expenditure or allowance as is mentioned in sub-clauses (i) and (ii) is excessive or unreasonable having regard to the legitimate business needs of the company and the (benefit derived by or accruing to it therefrom, so, however, that the deduction in respect of the aggregate of such expenditure and allowance in respect of any one person referred to in sub-clause (i) shall, in no case, exceed (A) where such expenditure or allowance relates to a period exceeding eleven months comprised in the previous year, the amount of seventy-two thousand rupees; (B) where such expenditure or allowance relates to a period not exceeding eleven months comprised in the previous year, an amount calculated at the rate of six thousand rupees for each month or part thereof comprised in that period: Provided that in a case where such person is also an employee of the company for any period comprised in the previous year, expenditure of the nature referred to in clauses (i), (ii), (iii) and (iv) of the second proviso to clause (a) of sub-section (5) of S.40 A shall not be taken into account for the purposes of sub-clause (A) or sub-clause (B), as the may be. Explanation. Explanation. The provisions of this clause shall apply notwithstanding that any amount not to be allowed under this clause is included in the total income of any person referred to in sub-clause (i)." There is no dispute that the assessee is a company and it paid remuneration to the Managing Director and therefore S.40 (c) will apply in the present case. The above provision empowers the assessing officer to disallow the payment of remuneration paid to a Director which is excessive or unreasonable. It also places a limit on the allowable amount of remuneration at Rs. 72,000 for the whole year. However, the counsel for the assessee reiterated the contention that inasmuch as the Income Tax Officer has not recorded a finding that the salary paid to the Managing Director is excessive or unreasonable, the whole of the expenditure claimed is allowable. This contention was negatived by the Tribunal, we also do not find our way to countenance it. A similar argument was advanced on behalf of an assessee before the Calcutta High Court in Billaspur Spinning Mills & Industries Ltd. v. Commissioner of income Tax, West Bengal III (1962) 135 ITR 496. After interpreting the relevant provisions and taking note of notes on clauses of the relevant Finance Bill, the Division Bench of the said court ultimately held: "In that background, of the matter, it appears to us that there were two conditions independently to be fulfilled, i.e., that the ITO might disallow if he found that the remuneration was excessive or unreasonable and further even in cases where he arrives at no such finding, if the expenditure or allowance exceeded Rs. 72,000, then no such expenditure or allowance was allowable." We are perfectly in agreement with the aforesaid decision of the Calcutta High Court. In view of the above situation, the disallowance of Rs, 3,93,430 balance salary paid to the Managing Director is totally justified in this case. 5. Now we will advert to claim of weighted deduction under S.35 B for the expenditure incurred which are specified in question 3 above. It was argued by the counsel for the assessee that the expenses specified as items (a) to (j) are allowable either under sub-clause (iv) or sub-clause (vii) of S.35B(1)(b). The assessee has incurred above expenses in the course of carrying out its business activities in Libya. It was argued by the counsel for the assessee that the expenses specified as items (a) to (j) are allowable either under sub-clause (iv) or sub-clause (vii) of S.35B(1)(b). The assessee has incurred above expenses in the course of carrying out its business activities in Libya. Since these expenditures have been actually incurred in relation to the construction work in Libya, they are not expenditures for 'promotion of sale' contemplated in the aforesaid sub-clauses of S.35B(1)(b). There is no dispute in this reference regarding the expenditure incurred by way of payment of rent for office room and of its maintenance. That has been allowed by the Tribunal. From the nature of the expenses claimed by the assessee, we feel that there is no nexus between the expenditure incurred and sales promotion outside India. Therefore, the disallowance of aforesaid expenditures by the Tribunal is perfectly in order 6. In view of the aforesaid discussion, all the questions are answered in the affirmative, that is to say against the assessee and in favour of the Revenue. A copy of this judgment under the seal of the court and the signature of the Registrar shall be forwarded to the Income Tax Appellate Tribunal, Cochin Bench as required by law.