Case Law Details
Carmel Softech Pvt. Ltd. Vs ITO (ITAT Chennai)
We noted that the Tribunal in the case of The Bombay Samachar Pvt. Ltd., supra, has considered the issue of applicability of provisions of section 40A(2)(b) of the Act to the directors remuneration and held that this provision will not apply to the directors payment for holding that the payment is excessive or unreasonable in the absence of any material brought on record to demonstrate that the payment is actually excessive or unreasonable having regard to market rate for the goods, services or facilities availed or the business need of the assessee or commensurate with the benefit derived by the assessee. In the present case before us also the AO has not carried out any exercise for holding the payment of remuneration to the directors that the same is unreasonable or not in consonance with the payment of directors or remuneration. We note that in this year the turnover is at Rs.1,42,13,393/- and profit earned is at Rs.84,40,020/- and remuneration paid to these three directors are at Rs.75,07,380/-. Even it is accepted position that the directors have paid taxes on these remunerations on maximum margin rate and there is no revenue loss to the Department. In view of the above, we are of the view that in the absence of any findings by the AO that the directors remunerations are excessive and unreasonable, we reverse the orders of lower authorities and allow the appeal of assessee.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-3, Chennai in ITA No.49/2015-16/A-1 dated 29.12.2017. The assessment was framed by the ITO, Corporate Ward 1(3), Chennai for the assessment year 2012-13 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 25.03.2015.
2. The only issue in this appeal of assessee is as regards to the order of CIT(A) and that of the AO in holding that the directors remuneration is excessive and thereby disallowing excess directors remuneration amounting to Rs.58,19,376/-. For this, assessee has raised various grounds which are argumentative and hence need not be reproduced.
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