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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: HONBLE KUL BHARAT & HONBLE MANISH BORAD
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
M/s Suyash Exim Pvt Ltd ITA No 707/Ind/2017
Assessee has raised following grounds of appeal; “1. That the Ld. Commissioner of Income Tax (Appeals) erred in confirming disallowance made by Assessing Officer of Rs.3,00,000/- on account of remuneration paid to director Smt. Kavita Poddarunder section 40A(2)(b) of the Income Tax Act. 2 . That the Ld. Commissioner of Income Tax (Appeals) erred in confirming disallowance made without considering the facts of the case and appreciating the submissions of the assessee company. 3. That the disallowance made of Rs.3,00,000/- is not based on the facts of the case and needs to be deleted. 4. That the appellant craves leave to add alter and/or deleteany of the grounds of appeal”
Brief facts of the case as culled out from the records are that
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/-.
Aggrieved assessee preferred appeal before Ld. CI(A) and partly
M/s Suyash Exim Pvt Ltd ITA No 707/Ind/2017
succeeded Ld. CIT(A) confirmed the addition of Rs.3,00,000/-
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
M/s Suyash Exim Pvt Ltd ITA No 707/Ind/2017
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.
Now the assessee is in appeal before the Tribunal.
The sole grievance raised by the asseessee in its appeal is
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
M/s Suyash Exim Pvt Ltd ITA No 707/Ind/2017
Ld. Counsel for the assessee submitted that Smt. Kavita
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/-.
Per contra Ld. Departmental Representative vehemently
argued and supported the findings of lower authorities.
We have heard rival contentions and perused the records
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).
M/s Suyash Exim Pvt Ltd ITA No 707/Ind/2017
We find that the assessee company has disclosed income of
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
M/s Suyash Exim Pvt Ltd ITA No 707/Ind/2017
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.
Ground No.4 is general in nature which needs no
adjudication.
In the result appeal of the assessee is allowed.
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