M/S VAIBHAV YARN MILLS PVT. LTD.,LUDHIANA vs. DCIT, C-6, LUDHIANA

PDF · subscribers
ITA 1593/CHANDI/2018Status: DisposedITAT Chandigarh27 September 2019AY 2014-154 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the Assessing Officer had not properly appreciated the evidence and the services rendered by the director. The matter was restored to the Assessing Officer for fresh adjudication.

What were the facts?

The assessee paid Rs. 18 lacs as salary to its director, Smt. Rita Bhalla. The Assessing Officer disallowed Rs. 12 lacs of this salary under Section 40A(2)(b) as excessive.

What were the issues?

Whether the salary paid to the director was excessive and unreasonable, warranting disallowance under Section 40A(2)(b).

Which sections of the Income-tax Act were involved?

Section 40A(2)(b)

AI-generated summary — verify with the full judgment below

आदेश/Order

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against the order dated 13.08.2018 of the Commissioner of Income Tax (Appeals)- 3, Ludhiana [hereinafter referred to as CIT(A)].

2.

The assessee in this appeal has agitated the disallowance made by the Assessing Officer of Rs. 12 lacs on account of excessive salary paid to the director of the company invoking the provisions of section 40A(2)(b) of the Income Tax Act, 1961 (in short 'the Act').

ITA No. 1593-Chd/2018- M/s Vaibhav Yarn Mills Private Ltd., Ludhiana 2

3.

The Ld. Counsel for the assessee, at the outset, has submitted that

the Assessing Officer has not properly appreciated the evidences on the

file and services rendered by the Director namely Smt. Rita Bhalla who

was working full time for the company. The Ld. counsel has further

pointed out that in the previous assessment year, the Assessing Officer

had allowed Rs. 12 lacs as justifiable salary to Smt. Ritu Bhalla,

whereas, for the year under consideration, she has restricted the same to

Rs. 6 lacs out of the salary of Rs. 18 lacs paid to Smt. Ritu Bhalla. That

the above facts have not been considered by the Assessing Officer

while making the impugned disallowance. That even the Ld. CIT(A) has

not properly appreciated the written submissions filed by the assessee

in this respect. The Ld. counsel for the assessee, therefore, has

submitted that the assessee may be given an opportunity to properly

present its case before the Assessing Officer and to apprise the

Assessing Officer of the aforesaid facts and circumstances and also

about the services rendered by Smt. Ritu Bhalla justifying the salary of

Rs. 18 lacs paid to her which was not excessive or unreasonable having

regard to the fair market value of the services / job rendered by Smt.

Ritu Bhalla.

4.

The Ld. DR, on the other hand, has relied on the findings of the

lower authorities.

ITA No. 1593-Chd/2018- M/s Vaibhav Yarn Mills Private Ltd., Ludhiana 3

5.

Considering the above rival contentions of the Ld. Representatives

of the parties, we are of the view, that in the light of the above

submissions made by the Ld. Counsel for the assessee, the matter is

required to be examined afresh by the Ld. Assessing Officer. In view

of this, the impugned order of the Ld. CIT(A) is set aside and the matter

is restored to the file of the Assessing Officer for adjudication afresh on

this issue. The Assessing Officer will give proper opportunity to the

assessee to present its case. Needless to say that the assessee will

promptly appear before the Assessing Officer, as and when called for,

and will not contribute in delaying the proceedings.

6.

In the result, the appeal of the assessee is treated as allowed for

statistical purposes.

Order pronounced in the Open Court on 27.09.2019.

Sd/- Sd/- (संजय गग� / SANJAY GARG) (एन. के. सैनी / N.K. SAINI) उपा�य� /Vice President �या�यकसद�य/ Judicial Member Dated : 27.09.2019 “आर.के.” आदेशक���त�ल�पअ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकरआयु�त/ CIT 4. आयकरआयु�त (अपील)/ The CIT(A) 5. �वभागीय��त�न�ध, आयकरअपील�यआ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड�फाईल/ Guard File

ITA No. 1593-Chd/2018- M/s Vaibhav Yarn Mills Private Ltd., Ludhiana 4

आदेशानुसार/ By order, सहायकपंजीकार/ Assistant Registrar

More judgments on Section 40A(2)(b)

All 1,172 judgments and leading authorities on Section 40A(2)(b) →

Recent GST High Court judgments

Search GST case law →