Gokal Chand Mital, J.
1. M/s Amritsar Transport Co. (P.) Ltd., Amritsar (hereinafter called 'the assessee'), was engaged in transport business during the assessment year 1970-71 relevant to the accounting period ending January 31, 1970. The assessee claimed that it had paid Rs. 12,000 as salary to Jagmohan Mehra and Rs. 13,200 to Manmohan Mehra, sons of Smt. Bimlawati, director of the assessee company, as they were employed with the assessee company. The Income-tax Officer found that these two persons had very little experience in the line of business, they were less than 26 years of age, their salaries in the earlier years were allowed only at the rate of Rs. 400 per month, that the nature of work entrusted to them was not commensurate to the salary claimed and that the employees much senior to them were paid lesser salary and after invoking the provisions of Section 40(c) of the Income-tax Act, 1961 (hereinafter called 'the Act'), it was held that the salary paid to them was excessive and unreasonable and having regard to the legitimate business needs of the company, concluded that Rs. 500 per month for each of the two persons could be allowed as reasonable salaries. The excess salary was disallowed. The assessee's appeal remained unsuccessful before the Appellate Assistant Commissioner. However, on further appeal to the Tribunal, after upholding all the findings recorded by the Income-tax Officer on facts, it concluded that salary at the rate of Rs. 750 per month to each of the two persons was quite reasonable and the amount claimed in excess of the said amount was disallowed under Section 40(c) of the Act. Feeling dissatisfied, the assessee sought a reference and the Tribunal has referred the following questions of law for the opinion of this court:
'1. Whether, on the facts and in the circumstances of the case, the findings of the Tribunal that the remuneration paid to S/Shri Jagmohan Mehra and Manmohan Mehra was unreasonable within the meaning of Section 40(c) of the Income-tax Act, 1961, is based on any material?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in disallowing a part of the salary paid to S/Shri Jagmohan Mehra and Mamnohan Mehra during the assessment year 1970-71?
3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that 1/4th of the total expenditure incurred by the assessee by way of entertainment was hit by the provisions of Section 37(2A) of the Income-tax Act, 1961 ?'
2. The counsel for the parties are agreed that the third question is covered by a Full Bench decision of this court in CIT v. Khem Chand Bahadur Chand , in favour of the Department and against the assessee and, therefore, the third question is answered in the affirmative and in favour of the Department.
3. As regards the first two questions, the findings of fact have been recorded by the Tribunal on appreciation of evidence that the remuneration paid to the two sons of the director of the assessee company was excessive and unreasonable. In arriving at this conclusion, numerous factors were kept in view. It has been held by this court in Auto Piston . v. CIT , that these are pure questions of fact and once that is so, on the facts found, it cannot be said that the Tribunal was in error in deleting that part of the remuneration which was found to be unreasonable within the meaning of Section 40(c) of the Act because the finding is based on the material available on the record. Both the questions are interconnected. We find that the finding recorded by the Tribunal about the unreasonableness of the amounts paid to them beyond Rs. 750 per month is based on material available on the record. Accordingly, both these questions are also answered in the affirmative, i.e., in favour of the Department and against the assessee.
4. For the reasons recorded above, all the three questions are answered in the affirmative, i.e., in favour of the Department and against the assessee. However, there will be no order as to costs.