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Income Tax Appellate Tribunal, KOLKATA BENCH “C” KOLKATA
Before: Shri J.Sudhakar Reddy & Shri S.S.Godara
Shri Saurabh Kumar, Addl. CIT-SR-DR अपीलाथ� क� ओर से/By Appellant Shri RakeshJain, FCA ��यथ� क� ओर से/By Respondent 05-07-2018 सुनवाई क� तार�ख/Date of Hearing घोषणा क� तार�ख/Date of Pronouncement 25-07-2018 आदेश /O R D E R PER S.S.Godara, Judicial Member:- This Revenue’s appeal for assessment year 2011-12 calls into question correctness of Commissioner of Income Tax (Appeals)-9, Kolkata’s order dated 24.02.2016 in case No.250/CIT(A)-9/Circle-2/2015-16/Kol, reversing Assessing Officer’s action inter alia disallowing assessee’s remuneration paid to its directors totaling to ₹6,78,356/-, business promotion expenses of ₹83,52,600/- and office maintenance expenditure of ₹22,55,277/-; respectively in assessment order dated 26.03.2014, involving proceedings u/s. 144 of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case file perused.
A.Y. 2011-12 JCIT(OSD), Cri-2(1) Kol. Vs. M/s Axiom Estate Advisory Services Pvt. Ltd. Page 2 2. We come to the first issue of disallowance of remuneration paid to assessee’s two directors namely, Shri Avijeet Das and Shri Arnab Dey involving sums of ₹8,89,996/- and ₹4,66,716/-; respectively, disallowed by the Assessing Officer to the extent of 50%. He was fair enough in not disputing genuineness of these two payments. This only reason for disallowing the same @ 50% in his order para 2.1 paged 2 of assessment order was that assessee’s financial performance indicated loss of ₹223,04,098/- and therefore, the remuneration in question was exorbitant u/s. 40A(2)(b) of the Act. He therefore disallowed 50% of the said claim coming to ₹6,78,356/-. The CIT(A) as reversed Assessing Officer’s action mainly on the ground that directors’ remuneration in case of corporate entity could not be disallowed merely because it has shown loss during the relevant previous year. Learned Departmental Representative vehemently contends during the course of hearing that CIT(A)’s findings are totally non speaking. He therefore seeks to get the instant lis restored back to the Assessing Officer. We find no merit in Revenue’s instant argument. The fact remains that the Assessing Officer has disallowed assessee’s impugned claim to the extent of 50% only by treating the same to be exorbitant in view of its losses (supra). Section 40A(2)(b) of the Act makes it clear that such a finding has to be vis-à-vis market rate of relevant services only and not otherwise. We do not find any such comparison drawn at the Assessing Officer’s end during the course of assessment. There is further no justification in Revenue’s stand that mere incurring of loss invites disallowance of directors’ remuneration as these two counts of expenditure and financial performance stand on totally different footing. We therefore reject Revenue’s above argument as well as its first substantive ground.
The Revenue’s next grievance seeks to revive assessee’s business promotion expenditure disallowance of ₹83,52,600/- made in assessment order. Learned Departmental Representative takes us to pages 2 & 3 of the assessment order indicating the assessee to have filed all the relevant details through post under the head “expenditure towards business promotion for India properties” The Assessing Officer invoked the impugned disallowance on the ground that relevant necessity or business expediency of the said expense remained unexplained. All this resulted in the impugned disallowance. A.Y. 2011-12 JCIT(OSD), Cri-2(1) Kol. Vs. M/s Axiom Estate Advisory Services Pvt. Ltd. Page 3 4. The CIT(A)’s order in para 4.3 holds the Assessing Officer to have made the impugned disallowance without any examination or verification. He is of the view that the assessee’s identical expenses stand accepted in preceding and succeeding assessment years. Learned Departmental Representative vehemently contends during the course of hearing that Assessing Officer had rightly disallowed the impugned business promotion expense on account of assessee’s failure in filing its correspondence explanation. We find no substance in Revenue’s instant argument. Learned counsel take us to assessee’s paper book pages 42 to 107 indicating it to have incurred the impugned expenditure in case of payees M/s Axiom Estates USA Income, Axiom Holdings Ltd., Dubai, UAE, Google India Pvt. Ltd., Axiom Estates Advisory Services Pvt. Ltd. and others. All the said payments have been subjected to TDS deduction as well; wherever necessary. Relevant services in question appear to be mainly of in the nature of advertisement and display of hoardings. The assessee has complied with the relevant statutory provision u/s. 195 of the Act as well. This crucial documentary evidence has gone unrebutted from the Revenue side. Its only case as already stated hereinabove is that assessee could not explain the relevant business expediency. We observe in this backdrop that assessee had to incur the impugned expenditure for the purpose adverting its properties in India and abroad for garnering better revenue. Learned Departmental Representative fails to dispute the fact that the Assessing Officer had not issued any notice to either the assessee or any of the corresponding payees to verify the relevant details. This appears to be precise reason for the CIT(A) for deleting the impugned disallowance. We therefore affirm the CIT(A)’s action under challenge granting relief to the assessee qua the instant issue. Revenue fails in its second substantive ground as well.
This leaves us to Revenue’s third and last substantive ground pleading that CIT(A) has erred in law as well s on facts in deleting office maintenance expenses disallowance made by the Assessing Officer to the tune of ₹22,57,227/-. We notice herein as well that Assessing Officer invoked the impugned disallowance alleging that assessee to have filed its details through post qua payment made to M/s Desert Dunes International Company on account of office maintenance without any evidence in support. The CIT(A) reverses the same on the ground that the Assessing Officer has