ROYAL HYDRAULIC P .LTD,MUMBAI vs. ITO 7(2)(1), THANE

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ITA 3416/MUM/2012Status: DisposedITAT Mumbai12 February 2016AY 2007-085 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal decided on two main issues: the disallowance of salary to the Director under Section 40A(2)(b) and the addition made under Section 50C for the sale of property. The specific outcome for each issue is detailed in the full judgment.

What were the facts?

The assessee company, engaged in the import and sale of rubber products, paid salary to its Director. The AO restricted this salary based on a previous year's disallowance under Section 40A(2)(b) of the Act. Additionally, the assessee sold a shop and offered capital gains, but the AO questioned the sale consideration based on Stamp Duty Valuation.

What were the issues?

Whether the disallowance of salary paid to the Director was justified under Section 40A(2)(b), and whether the addition made under Section 50C for the sale of property was correct.

Which sections of the Income-tax Act were involved?

Section 40A(2)(b),Section 50C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, MUMBAI

Before: S/SHRI B.R.BASKARAN & SHRI SANDEEP GOSAIN

For Appellant: Shri N V Sheth
Hearing: 17.12.2015Pronounced: 12.2.2016

PER B.R.BASKARAN,AM:

The assessee has filed this appeal challenging the order dated 17.1.2012 passed by the ld. CIT(A)-13, Mumbai and it relates to the assessment year 2007-08. 2. The grounds urged by the assessee relate to the following issues : a) Disallowance made under section 40A(2)(b) of the Act; b) Addition made u/s 50C of the Act.

2

3.

The assessee company is engaged in the business of import and sale of rubber product and rubber chemicals. During the course of assessment proceedings, the AO noticed that the assessee has paid salary of Rs.1,63,500/- to its Director named as Smt. Samina Mazhar Vohra. The AO noticed that the AO, in the immediately preceding year has restricted the remuneration paid to Smt.Samina Mazhar Vohra to Rs.96,380/- by invoking the provisions of sec. 40A(2)(a) of the Act and accordingly disallowed the balance amount of remuneration. Accordingly, the AO restricted the salary of Smt.Samina Mazhar Vohra to Rs.96,380/- in the instant year also, which resulted in a disallowance to Rs.67,120/- u/s 40A(2)(b) of the Act.

4.

The AO also noticed that the assessee has sold a shop located at Vashi for a sum of Rs.5 lakhs and has offered Short Term Capital Gains of Rs.2,91,619/-. The AO noticed that the sale agreement was not registered and hence the AO called for Stamp Duty Valuation from the Sub-

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