CANARA ROBECO ASSET MANAGEMENT CO.LTD,MUMBAI vs. DCIT CIR 2(1), MUMBAI

The representatives of both sides agreed that the facts on the basis of which the penalty have been levied are common and the issues are identical, therefore, both these appeals were heard together and disposed of by this common order for the sake of convenience.

Briefly stated the facts of the case are that during the financial year 2007-08 one Mr. Rajnish Narula was appointed as CEO, the date of appointment was 26.9.2007. Before the close of the financial year i.e. on 27th March, 2008, the assessee made an online application to the Ministry of Corporate Affairs seeking approval of the Central Government to the appointment and remuneration of said Shri Rajnish Narula. On 3rd September, 2008 a letter was issued by the Ministry of Corporate Affairs requesting the asesee to furnish further details. Reply was filed on 11.9.2008 and at the fag- end of the financial year, Ministry of Corporate Affairs approved the appointment on 21st January, 2009. However, the Ministry restricted the remuneration as per the formula given by it. On 16th September, 2009, the Board of Directors agreed that the remuneration should be restricted as specified as per the letter from Ministry of Corporate Affairs and on 26th September, 2009 in the Annual General Meeting, it was resolved that the remuneration should be as per Schedule XIII.

Aggrieved by the levy of penalty, the assessee carried the matter before the Ld. CIT(A) but without any success.

Before us, the Ld. Counsel for the assessee stated that salary was paid by Robeco Group NV and the assessee has only recorded the liability in its books of accounts therefore it cannot be said that the assessee has concealed any particulars of income or provided inaccurate particulars of income, since the provision for the liability undertaken by the assessee have been duly explained in the Audit statement of accounts by way of Note to Accounts. It is the say of the Ld. Counsel that penalty cannot be levied u/s. 271(1)(c) of the Act for the simple reason that the approval of the Ministry came later on while the assessee had already provided for the liability in its books of account. The Ld. Counsel drew our attention to the reversal of excess remuneration in the books of account and pointed out that the reversals have been offered to tax in financial year 2010-11.

Per contra supporting the orders of the Revenue authorities, the Ld. Departmental Representative pointed out that it was incumbent upon the assessee to take permission from the Ministry of Corporate Affairs at the time of appointment. It is the say of the Ld. DR that the assessee should not have provided for the entire amount when the appointment was only for 6 months.

We have given a thoughtful consideration to the orders of the authorities below and with the assistance of the Ld. Counsel we have gone through the relevant documentary evidences brought on record before us. There is no dispute in the chronological sequence of event mentioned elsewhere. A perusal of the same should show that the approval from the Ministry of Corporate Affairs was received when two financial years have crossed and the assessee had provided for the liability undertaken for Robeco Group NV. It is also an undisputed fact that reversal was made in the books of accounts in respect of excess remuneration.

Before closing, we find that the penalty has also been levied on account of FOREX loss when the payment was made to the JV partner in respect of the remuneration. We find that this is directly related to

In the result, both the appeals filed by the assessee are allowed. Order pronounced in the open court at the time of hearing on 22nd December, 2015.