MESSRS. A.K. SHAW,HOOGHLY vs. ITO, WARD - 23(2), HOOGHLY, HOOGHLY

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ITA 60/KOL/2018Status: DisposedITAT Kolkata11 July 2018AY 2013-144 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal noted that a similar issue for a different assessment year was decided in favor of the assessee. The Tribunal found the AO's reasoning for disallowance to be erroneous and that Section 40A(2) was not applicable. Therefore, the disallowance was vacated.

What were the facts?

The assessee claimed managerial remuneration of Rs. 3,96,000/-, which was disallowed by the Assessing Officer and confirmed by the CIT(A). The assessee argued that the remuneration enhanced turnover and the recipients had paid due taxes, preventing double taxation.

What were the issues?

Whether the disallowance of managerial remuneration paid to individuals was justified, especially when the expenditure was claimed to have enhanced turnover and taxes were already paid by the recipients.

Which sections of the Income-tax Act were involved?

Section 40A(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BENCH ‘SMC’ KOLKATA

Before: Hon’ble Shri N.S.Saini, AM ]

Heard together (2 matters)

ITA No.60/Kol/2018
ITA No.144/Kol/2018

Read from the judgment's own cause title. This page is filed under one of them.

This is an appeal filed by the assessee against the order dated 10.11.2017 of C.I.T-(A)-6, Kolkata for A.Y. 2013-14.

2.

The assessee has raised the following grounds :- “1) ... For that the order of the C.I.T.(Appeal) vide Appeal No.: 426//CIT(A)- 6/KOL-2015-2016 is misconceived, bad on merits of facts and in law.

2) ... For that the C.I.T.(Appeal) erred in law confirming the "Disallowance of the Managerial Remuneration in as much as the Appellant by virtue of payment of the said Managerial Remuneration had been able to enhance the turnover to a considerable extent.

3) ... For that the recipients of the Managerial Remuneration had already paid "Due Taxes" on the said Remuneration received, resulting in "Double Taxation".

4) For that the rest may be argued at the time of hearing of this Appeal.”

3. The sole issue involved in this appeal is that the Assessing Officer disallowed Rs.3,96,000/- claimed by the assessee under the head “Managerial Remuneration “ which was paid to Mr.Hiranmoy Gon and Mrs. Sudipta Gon which was confirmed by the CIT(A). But on further appeal to the Tribunal, the Tribunal vacated the disallowance. He filed copy of the order of this bench of the Tribunal in the case of assessee itself in dated 27.06.2018. Hence he submitted that the issue is squarely covered in favour of the assessee by the above decision of the Tribunal and therefore following the same the addition should be deleted.

4.

The Learned Departmental Representative agreed with the above submission of the Authorised Representative of the assessee.

5. We find that the Tribunal in A.Y.2014-15 held as under :- “2. The assessee is a partnership firm engaged in the business of wine merchants. It has two partners. The issue before me is the disallowance of expenditure claimed of Rs. 3,96,000/- under the head ‘Managers Remuneration’ paid to Mr. Hiranmoy Gon and Ms. Sudipta Gon.

3.

On a careful consideration of the facts and circumstances of the case, a perusal of the papers on record, orders of the authorities below as well as case law cited, I hold as follows.

4. After hearing rival contention I find that the premises on which the AO disallowed the claim of the assessee is erroneous. The assessee is a partnership firm. The AO confused the payment of salary to manager, with that of payment of salary to a managing director or managing personnel. The fact remains that the assessee’s turnover has increased from 1.8 crores for the financial year 2009-10 to 4.14 crores for the financial year 2012-13. The Ld. CIT(A) has not passed a speaking order. Section 40A(2) does not come into play as no comparative instance have been cited by the AO to come to a conclusion that the expenditure is excessive or unreasonable, having regard to the fair market value of such services.

5.

Thus, the ground of the assessee is allowed and the AO is directed to grant deduction of managers remuneration as claimed by the assessee.

6.

In the result, the appeal of the assessee is allowed.”

6. The facts being identical respectfully following the precedent we set aside the orders of the lower authorities and delete the addition of Rs.3,96,000/- under the head ‘Managers Remuneration ‘ and allow the ground of appeal of the assessee.

7.

In the result the appeal of the assessee is allowed.

Order pronounced in the open Court on 11.07.2018.

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