Case Law Details
VGA Digital Printers Pvt. Ltd. Vs JCIT (ITAT Pune)
It is seen that the assessee paid total remuneration of Rs.67,23,600/- to three directors. A sum of Rs.43.41 lakhs was paid in the preceding year. The assessee complied with the requirements of the Companies Act, 1956 for enhancing salary and bonus to the directors. Not only that, the assessee advanced reasons before the AO which led to increase in the salary of directors. The AO had made out a case that if the assessee company had paid dividend instead of remuneration to directors, such payment would have been fetched more tax. In our considered opinion, there is no question of changing the character of transaction from payment of salary to the possible payment of dividend, resulting into potential higher inflow of tax. If the view of the authorities below is taken to a logical conclusion, then every payment of salary and bonus to directors would call for disallowance because in any case the payment of amount to the them in the shape of dividend would fetch more tax. Obviously, it is a not a correct position in law. Since the assessee justified the payment of such salary and bonus to directors and also complied with the necessary provisions under the Companies Act, 1956 in this regard, we are satisfied that no case has been made out for any disallowance. The impugned order on this score is overturned and the disallowance is deleted.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal by the assessee is directed against the order passed by the Commissioner of Income-tax (Appeals)-5, Pune on 19-02-20 16 in relation to the assessment year 2011-12.
2. The first ground is general, which was not pressed by the ld. The same, therefore, stands dismissed as ‘Not pressed’.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
