ORANGE ASSOCIATES PVT. LTD.,NEW DELHI vs. ACIT, CIRCLE- 22(1), NEW DELHI

ITA 5874/DEL/2017Status: DisposedITAT Delhi24 September 2021AY 2014-156 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the disallowance made on an ad hoc basis under Section 40A(2)(b) is not sustainable, especially when there is no attempt to evade tax and the directors have already paid tax at the highest rate. Following a coordinate bench's decision, the addition was deleted.

What were the facts?

The assessee company paid Rs. 1,00,00,000/- as remuneration to its Directors. The Assessing Officer disallowed 50% of this amount, and the CIT(A) reduced the disallowance to 15% (Rs. 15,00,000/-). The assessee appealed this disallowance.

What were the issues?

Whether the disallowance of remuneration paid to directors under Section 40A(2)(b) is justified when there is no evidence of tax evasion and the directors have paid tax at the highest rate.

Which sections of the Income-tax Act were involved?

Section 40A(2)(b)

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Income Tax Appellate Tribunal, DELHI BENCH ‘E’ : NEW DELHI

Before: SHRI KULDIP SINGH & SHRI PRASHANT MAHARISHI

For Appellant: Shri Taranpreet Kohli, CA
For Respondent: Shri Gaurav Pundir, Senior DR
Hearing: 20.09.2021

PER KULDIP SINGH, JUDICIAL MEMBER :

Appellant, M/s. Orange Associates Pvt. Ltd. (formerly

known as One Source Education Pvt. Ltd.) (hereinafter referred to as ‘the assessee’) by filing the present appeal sought to set aside

the impugned order dated 11.08.2017 passed by the Commissioner

of Income - tax (Appeals)-30, New Delhi qua the assessment year

2014-15 on the grounds inter alia that:-

2 ITA No.5874/Del./2017

“1. That the Authorities below erred both in law and on the facts in invoking the provisions of sec. 40A(2)(b) ignoring the facts on record and rejecting the explanations

The order continues below.

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