S.H. KELKAR & CO. P.LTD,MUMBAI vs. ADDL CIT 4(3), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद� राजे� के अनुसार PER RAJENDRA, AM- It is a recalled matter. Vide its order dated 13.3.2015 (MA No. 434/M/2014) the Tribunal have recalled its order with regard to the disallowance made under the head “legal and consultation charges”.We would like to reproduce the relevant portion of the order, passed by the Tribunal under section 254(2) of the Act and same reads as under :- “ 5. From the above, we find that the Tribunal had disallowed the legal and consultation charges observing that the legal expenditure was related to interse dispute between the two factions of the directors of the assessee company and that the expenses in relation to consultancy were incurred for operation of new manufacturing facility at Vaishali. So far as the disallowance of legal expenditure in relation to dispute between the directors of the company is concerned, in view of the law laid down by the Hon'ble Bombay High Court in the case of "CIT vs. M/s. Chemosyn Ltd., Mumbai" (supra) the issue, in our view, requires re examination because of the binding precedential value of the decision of the jurisdictional High Court. We also notice that the CIT had given a consolidated finding about the nature of different expenses incurred in relation to Vaishali unit and the detail of each of the expenses has not been examined by him separately and the Tribunal thereafter also observed that since the expenditure was incurred for operation of new unit, hence the same was capital in nature. However, since the assessee has pointed out that the unit was already under operation and that the details of each of the expenses have been given separately and that the said details have escaped the attention of this Tribunal, hence we find that, in view of the above contention of the assessee, the issue relating to legal and consultation charges also needs re-examination.Moreover, the issues relating to legal and consultation charges have been taken together and decided by a composite finding. In view of the law laid down by the jurisdictional High Court, we are of the view that the issue relating to legal expenses is required to be re-adjudicated. Hence, the issue relating to the consultation charges being part of the composite finding/adjudication given vide para Nos.19 to 24 in relation to ground Nos.10 to 12 of the assessee's appeal is also required to be re-adjudicated. We accordingly recall our findings given vide our order dated 07.11.14 in relation to ground Nos.10 to 12 of the assessee's appeal bearing

ITA 678/12 & 4452/12 -SHkelkar ITA No.678/M/2012 for A.Y. 2008-09. Let these issues be reheard and decided by way of a fresh hearing. However, our finding in respect of the remaining grounds of appeal and also in relation to & 72571M12010 will remain as such.

6. In view of above, the order dated 07.11.2014 passed in ITA No.678/M/2012 for A.Y. 2008-09 is recalled to the limited extent in relation to findings given in respect of grounds No.10 to 12 and the registry is directed to fix the appeal for a hearing on ground Nos.10 to 12 of ITA No.678/M/20l2 for 11.05.2015. Parties are informed about the said date in open court and no separate notice will be issued.

7. In the result, the miscellaneous application of the assessee is hereby allowed. 2.During the course of hearing before us,the Authorised Representative (AR)stated that while adjudicating the appeal,filed by the assessee,the first appellate authority (FAA) had not considered the submissions made by the assessee and that the grounds were not adjudicated separately,that the Tribunal had restored back the issue to the file of the AO while deciding the appeal for the subsequent year,that the judgement of the Hon’ble Bombay HC, delivered in the case of Chemosyn Ltd. Mumbai(IT Appeal No. 361 of 2013)had to be considered while deciding the issue.Departmental Representative (DR) left the issue to the discretion of the Bench. 3.We have heard the rival submissions and perused the material before us.We find that the Tribunal had recalled its order with regard to the legal expenses,that the FAA had not dealt the issue in proper manner.He had dealt about three issues together.In our opinion,issue needs further verification.The AR stated that if the matter is sent back to the FAA,the assessee would like to file necessary details and explain the matter.Considering the peculiar facts and circumstances of the case,in the interest of justice,we are remitting back the matter to the file of the FAA.He is directed to decide the issue afresh and after considering the judgment of Chemosyn Ltd. Mumbai (supra).Effective ground of appeal is decided in favour of the assessee, in part. ITA No.4452/M/2012-/Assessment Years-2009-10: 4.The assessee has raised two grounds of appeal for the above mentioned AY.First ground pertains to legal expenses.While deciding the appeal for the earlier AY.,we have restored back the issue to the file of the FAA.Following the same,we are sending back the matter to the FAA for fresh adjudication. 5.Next ground of appeal is about payment of commission to the managing director and the director of the assessee-company.We find that the similar issue had arisen in the earlier years and the Tribunal vide its order dated 07.11.2014(ITA/7256/Mum/2010-AY.2006-07)had decided the identical issue in favour of the assessee in following manner: “7. We have considered the rival submissions. A perusal of the impugned order of the Ld. CIT(A) reveals that the amount of salary plus commission paid to the directors has not been held to be excessive by the lower authorities. There is no denial of the fact that the amount paid was reasonable in comparison to the remuneration paid for the services in the market. There is no denial of the fact that the dividend of Rs.3 crore was declared in the year under consideration. There seems merit in the contention of the ld. AR that the company has 29 shareholders and 4 directors whereas the commission was paid to two working directors only. So far the reliance of the Ld. D.R. on the special bench decision of the Tribunal in the case of “Dalal Broacha Stock Broking P. Ltd. v. Addl. CIT” (supra) is concerned, we find that the facts of the present case are 2

ITA 678/12 & 4452/12 -SHkelkar