Revenue appeal dismissed on disallowance of Director's remuneration. Director salary differentiation upheld.

The Revenue's appeal against the disallowance of Director's remuneration under section 40A(2) of the I.T. Act for the A.Y. 2010-11 was dismissed. The ld. CIT(A) upheld the justification for the increased remuneration of a new director based on qualifications and experience, emphasizing that salary differentiation among directors is permissible at the company's discretion. The AO's reasoning for partial disallowance, premised on salary parity with the old director, was deemed unjustified. The appeal was dismissed due to the lack of substantial evidence challenging the CIT(A)'s detailed findings.

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Issues involved: Disallowance of Director's remuneration under section 40A(2) of the I.T. Act.

Summary:
The appeal was filed by the Revenue against the order of ld. CIT(A) -9, Mumbai for the A.Y. 2010-11 regarding the disallowance of Director's remuneration amounting to Rs. 87,45,107/- under section 40A(2) of the I.T. Act. The AO observed an increase in salary and allowances claimed by the assessee, specifically focusing on the remuneration paid to a new director. The AO considered the increase excessive and invoked section 40A(2)(b) to restrict the remuneration paid to the new director. However, the ld. CIT(A) deleted the addition, stating that the salary paid to the new director was justified based on his qualifications and experience.

The AO's disallowance was based on the premise that the salary of the new director should not exceed that of the old director, leading to the partial disallowance of the remuneration. The ld. CIT (A) disagreed with this reasoning, highlighting that the remuneration was set based on the new director's qualifications and experience, emphasizing that not all directors need to be paid equally. The decision to fix remuneration was deemed as per the company's discretion. The Revenue's appeal was dismissed as the detailed findings of the ld. CIT(A) were not challenged with any substantial evidence.

In conclusion, the ld. CIT(A) justified the remuneration paid to the new director based on his academic and business achievements, concluding that the disallowance made by the AO under section 40A(2)(b) lacked convincing reasons and was directed to be deleted. The appeal of the Revenue was dismissed, upholding the decision of the ld. CIT(A).

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