Appellate Tribunal partially allows appeal, directs reassessment. Director's commission allowed, Canco Advertising payment disallowed. Interest levy consequential.

The Appellate Tribunal partially allowed the appeal filed by the assessee. It held that Rule 8D of I.T. Rules was not applicable for the assessment year in question, directing the Assessing Officer to re-decide the disallowance issue. The Tribunal also allowed the Director's commission and disallowed the payment to Canco Advertising Pvt. Ltd. for lack of evidence of services rendered. The levy of interest under section 234B was considered consequential without specific adjudication.

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Issues:
1. Disallowance under section 14A r.w. Rule 8D of I.T. Rule for assessment year 2007-08.
2. Disallowance of Director's commission amounting to Rs. 22,71,543.
3. Disallowance of payment of Rs. 6,73,440 to M/s. Canco Advertising Pvt. Ltd.
4. Levy of interest u/s. 234B of the I.T. Act.

Issue 1: Disallowance under section 14A r.w. Rule 8D of I.T. Rule for assessment year 2007-08:
The Appellate Tribunal held that Rule 8D of I.T. Rules was not applicable for the assessment year under consideration based on the decision of the Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. vs. DCIT. The Tribunal set aside the orders of the authorities below and directed the Assessing Officer to re-decide the issue after giving the assessee a hearing and considering all relevant evidence. Consequently, the ground taken by the assessee was allowed for statistical purposes.

Issue 2: Disallowance of Director's commission amounting to Rs. 22,71,543:
The Tribunal noted that the assessee company had paid Director's commission to non-executive directors for several years. The Assessing Officer disallowed the commission, stating it was not wholly and exclusively for the purpose of business. However, the Tribunal observed that the commission was paid within the limits set by the shareholders and was justifiable as the directors were involved in various business activities. Considering the facts, the Tribunal allowed the appeal of the assessee, deleting the disallowance made by the authorities below.

Issue 3: Disallowance of payment of Rs. 6,73,440 to M/s. Canco Advertising Pvt. Ltd.:
The Assessing Officer disallowed the payment made to Canco Advertising Pvt. Ltd. for consultancy and advisory fees, stating it had no relevance to the business affairs of the assessee. The CIT(A) confirmed this disallowance, noting that none of the proposals brought by Canco were utilized by the assessee. The Tribunal upheld the decision, as there was no evidence of services rendered justifying the payment. Consequently, the ground taken by the assessee was rejected.

Issue 4: Levy of interest u/s. 234B of the I.T. Act:
The Tribunal mentioned that the levy of interest under section 234B was consequential and did not require specific adjudication. Therefore, no further discussion or decision was provided on this issue.

In conclusion, the Appellate Tribunal partially allowed the appeal filed by the assessee, providing detailed analysis and decisions on each of the issues raised in the case.

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