DCIT CEN CIR 13, MUMBAI vs. GOLDEN WINGS P.LTD, MUMBAI

noted by the Assessing Officer himself as reproduced in earlier part of this order. But without giving any cogent reasoning, the assessing officer has rejected the same. His only reasoning is that the performance of the company has not been upto mark. By no stretch of imagination, the Assessing Officer can be said to be holding appropriate qualification to determine appropriate managerial remuneration and incentive that the company should give. No case has been made out that in making the payments there has been any violation of the provisions of payment of managerial remunerations as mandated in the Companies Act. As held by that Hon’ble Supreme Court in the case of Walchand and Co. (P.) Ltd. [1967] 65 ITR 381 (SC) that in applying the test of commercial expediency, for determining whether the expenditure was wholly and exclusively laid out for the purpose of the business the reasonableness of the expenditure has to be judged from the point of view of the businessman and not of the Revenue. Hence, torch bearer of the corporate governance mantle donned by the assessing officer is uncalled for and the disallowance is not sustainable on the facts

12 & 6228/Mum/2014 (A.Y. 2010-11) M/s. Golden Wings Pvt. Ltd. and circumstances of this case. Another reasoning given by the assessing officer is that it is a repayment of capital contribution of Rs.1 crore, on the basis of the statement of the said director. The ld. Commissioner of Income Tax (Appeals) has correctly held that this cannot be sustained as a capital contribution of Shri Pradip Thampi remains at Rs.1 crore, at the end of the relevant assessment year. Hence, the view that the payment is reimbursement of capital is wholly unsustainable. Hence, in our considered opinion, there is no justification whatsoever in making the disallowance. Accordingly, in the background of the above discussion and precedent, in our considered opinion, there is no cogent basis for making the disallowance on the ground that it is a capital reimbursement and/or not commensurate with the services provided. Accordingly, we set aside the order's of the authorities below and delete the disallowance.