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Facts
The assessee appealed an order from the Commissioner of Income Tax (Appeals) related to assessment year 2015-16. The appeal involved proceedings under section 143(3) of the Income-tax Act. The assessee initially raised grounds regarding disallowance of expenditure and depreciation, but these were withdrawn.
Held
The Tribunal considered the issue of disallowance under section 40A(2)(b) concerning director's remuneration. The revenue failed to provide market rate comparisons to justify the disallowance, a point supported by a precedent case.
Key Issues
Whether the disallowance of director's remuneration under section 40A(2)(b) was justified without comparing with market rates, and whether the grounds related to disallowance of expenditure and depreciation should be pressed.
Sections Cited
143(3), 40A(2)(b)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: “SMC” NEW DELHI
Before: SHRI SATBEER SINGH GODARA
Date of hearing 21.01.2026 Date of pronouncement 21.01.2026 ORDER This assessee’s appeal for assessment year 2015-16, arises against the Commissioner of Income Tax (Appeals)/Addl/JCIT(A)- 1, Visakhapatnam’s DIN and order no. ITBA/APL/S/250/2025- 26/1082760744(1), dated 19.11.2025 involving proceedings under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Heard both the parties. Case file perused.
Learned counsel states very fairly that the assessee does not wish to press for his twin substantive grounds involving disallowance of expenditure and depreciation made by both the lower authorities after allegedly holding personal use element therein. Rejected as not pressed.
Next comes the remaining issue of section 40A(2)(b) disallowance of Rs.5.16 lakhs made by both the learned lower authorities alleging excessive than the market rate of director’s remuneration. The Revenue could hardly dispute that neither the learned Assessing Officer nor the CIT(A)’s respective findings refer to any market rates for the sake of comparison of assessee’s impugned remuneration so as to disallow the alleged excessive component therein which has been held as mandatory in (2022) 447 ITR 299 (Del), PCIT vs. Future First Info. Service Pvt. Ltd. Deleted in very terms.
This assessee’s appeal is partly allowed. Order pronounced in the open court on 21st January, 2026 Sd/- (SATBEER SINGH GODARA) JUDICIAL MEMBER Dated: 9th February, 2026. RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi
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