M/S SUYASH ESIM PVT. LTD,INDORE vs. ITO 2 (4), INDORE

PER MANISH BORAD, AM.

The above captioned appeal filed at the instance of assessee

pertaining to Assessment Year 2012-13 is directed against the

orders of Ld. Commissioner of Income Tax (Appeals)-II (in short

‘Ld.CIT(A)’], Indore dated 11.08.2017 which are arising out of the

order u/s 143(3) of the Income Tax Act 1961(In short the ‘Act’)

dated 19.03.2015 framed by ACIT-5(1), Indore. 1

the assessee is a private limited company engaged in various

commodities and derivatives. Return of income filed on 29.09.2012

for Assessment Year 2012-13 declaring total income of

Rs.2,12,62,890/-. The case was picked up for scrutiny and notices

u/s 142(1) and 143(2) was duly served upon the assessee.

Assessment completed u/s 143(3) of the Act at Rs.2,16,65,480/-

after making disallowance u/s 40A(2)(b) at Rs.3,00,000/- and

disallowance of various expenses at Rs.1,02,593/-.

observing as under;

“3.0 This ground of appeal is with regard to disallowance of Rs.3,00,000/ - on account of remuneration paid to director Smt. Kavita Poddar under section 40A(2)(b) of the Income Tax Act. I have carefully gone through the assessment order as well as submission of the appellant in this regard.

3.1 The appellant has submitted that the AO had made disallowance of remuneration of Rs. 3,00,000/- paid to director Smt. Kavita poddar u/s 40A(2)(b) of the IT Act out of remuneration paid of Rs 6,00,000/- to the said director by the appellant company. Smt. Kavita poddar was director of the company and involved in various aspects of the company since 15 years. The director Smt. Kavita Poddar was actively involved in the working of the company.

3.2 Further, the appellant has submitted that Smt. Kavita Poddar had the qualification of Msc. (Chemistry) and had vast experience in the business of the appellant company which the learned Assessing Officer had failed to appreciate and made the disallowance without giving any finding. Looking to the experience and qualification the remuneration paid to Kavita Poodar was quite reasonable and at par with the remuneration paid to the only other director of the appellant company Further, the remuneration paid to her had been allowed as shown by the department in earlier years also. The allowance of salary in previous years confirmed that the Director Smt. Kavita Poddar was actively involved in the working of the company and the increase in salary of directors was made in both Anil Poddar and Kavita Poddar, whereas the increase in salary had been accepted in the case of Anil Poddar, there 3 was no reason for disallowance in the case of Smt. Kavita Poddar. The learned Assessing Officer was disallowed the salary paid to Smt, Kavita Poddar on frivolous ground, in so far as by stating that the AR failed to furnish any documentary evidences i.e. director qualification, experience, effort made, work profile and her contribution for increasing revenue for the company. On the one' hand the learned Assessing Officer had considered payment at Rs. 3,00,000/- to be reasonable even while stated that experience, effort made etc. had not been explained.

3.3 I have carefully gone through the assessment order and find that the AO was asked to appellant to furnish the justification of the remuneration paid to Director Smt Kavita Poddar but the AR of the appellant had failed to furnish any documentary evidences i.e director qualification, experience, effort made, work profile and her contribution for increasing revenue for the company and on this basis, the AO disallowed Rs.3,00,000/- on account of remuneration paid to director Smt. Kavita Poddar under section 40A(2)(b} of the Income Tax Act. Therefore, I do not find any merit to interfere with the findings of the AO. Hence, the addition so made by the AO is hereby confirmed and accordingly, this ground of appeal is dismissed.

against the confirmation of disallowance of Rs.3,00,000/-made by

Ld.CIT(A) in respect of remuneration paid to Smt. Kavita Poddar,

Director. 4

Poddar is Director in the company since its inception. She is

regularly drawing remuneration and the assessee company is

consistently been allowed the claim of remuneration paid to her.

She is actively engaged in the business of the company. She is well

educated and experienced. Ld.A.O has himself allowed 50% claim

of remuneration. In these circumstances both the lower authorities

erred in confirming the disallowance u/s 40A(2)(b) of the Act at

Rs.3,00,000/-.

argued and supported the findings of lower authorities.

placed before us. Though the assessee has raised four grounds of

appeal, out of which Ground No.4 is general in nature and

remaining three grounds are raising a common issue relating to

disallowance u/s 40A(2)(b) of the Act of remuneration paid to Smt.

Kavita Poddar at Rs.3,00,000/- made by Ld.A.O and duly confirmed

by Ld. CIT(A).

Rs.2,12,62,890/- in the income tax return submitted on

29.09.2012. Minor disallowance of Rs.4,02,593/- has been made

by the Ld.A.O which includes the disallowance of remuneration

paid to Smt. Kavita Poddar as Director of company at Rs.3,00,000/-

It is an undisputed fact that since last 15 years Smt. Kavita Poddar

is the Director of the company and regularly drawing remuneration.

As submitted by the Ld. Counsel for the assessee Smt. Kavita

Poddar holds the qualification of M.Sc Chemistry. She has vast

experience in the business of the company. We also find that in the

past also claim of remuneration paid to Smt. Kavita Poddar have

been allowed consistently. Even in the instant case under appeal

50% of the remuneration have been allowed by Ld.A.O which

indicates that Ld.A.O is satisfied with the fact that Smt. Kavita

Poddar is providing her services to the company as Director. In

these given facts when the working of the Director has not been

disputed then mere making disallowance by applying section

40A(2)(b) of the Act without bringing anything on record to prove

that the alleged amount paid by the assessee to Smt. Kavita Poddar is neither fair nor unreasonable, then in such situation making an

ad-hoc disallowance of 50% is not justified. We therefore set aside

the findings of lower authorities and delete the disallowance of

Rs.3,00,000/-. In the result Ground No. 1 to 3 of the assessee are

allowed.

adjudication.

The order pronounced in the open Court on 26.12.2018.

Sd/- Sd/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER �दनांक /Dated : 26 December, 2018 /Dev Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By Order, Asstt.Registrar, I.T.A.T., Indore