INDRAPRASTHA LOGISTICS P.LTD,NEW DELHI vs. ACIT, CIRCLE-12(1), NEW DELHI

ORDER

Per Dr. B. R. R. Kumar, Accountant Member:

1. The Ld. CIT(A) has erred both in law and in facts in upholding the Ad-Hoc addition of Rs.31,80,000/- made to the returned loss on account of disallowance of salary expenses made tor elated party covered u/s 40(A)(2)b) of IT Act ignoring the facts of the case justifying such payments.

3. The assessee has made payment of Rs. 63,60,000/- to 11 persons which has been disallowed by the Assessing Officer u/s 40A(2)(b) of the Act. The Assessing Officer held that assessee has paid salary to the relatives of the directors who, as per their qualification and experience, are not eligible for such high salary. The AO held that the assessee can hire employee of same qualification and experience on a one half of the salary given to the relatives. Therefore, the salary paid to the aforesaid relatives was considered excessive and 50% of Rs. 63,60,000/-, salary paid to the relatives was disallowed and added to the taxable income of the assessee. The ld. CIT(A) affirm the action of the AO holding that there is no justification and correlation between the payment of the salary and their contribution to the company.