Tribunal reduces disallowance of salary & bonus expenditure, citing increased investment in unlisted equity shares.

The Tribunal partially allowed the appeal by reducing the disallowance of salary and bonus expenditure from 90% to 50%. This decision was based on the company's increased investment in unlisted equity shares and its compliance with statutory requirements. The Tribunal found the initial disallowance excessive and unreasonable, considering the company's investment activities. The order was pronounced on January 08, 2020.

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Issues: Disallowance of salary expenditure

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of Rs. 17,55,000 made by the Assessing Officer on account of salary expenditure. The assessee, an Investment Company, declared a total income of Rs. 51,350 and debited Rs. 17,64,680 on account of salary and bonus in the Profit & Loss Account. The Assessing Officer disallowed the expenditure as bogus due to the failure of the assessee to provide relevant details of salary and bonus paid to nine employees. The ld. CIT(Appeals) upheld the disallowance to the extent of 90%. The Tribunal found the disallowance excessive and unreasonable, considering the investment activities of the company, which had increased its investment in unlisted equity shares significantly during the year. The Tribunal modified the order, restricting the disallowance to 50%.

The Tribunal noted that the assessee, being a Company engaged in investment activities, had significantly increased its investment in unlisted equity shares during the relevant year. The Tribunal considered the recovery of loans and advances amounting to Rs. 2.89 crores, which were invested in equity shares of unlisted companies. The Tribunal found the 90% disallowance of the salary and bonus expenditure to be excessive and unreasonable, given the company's investment activities and statutory compliance requirements. Therefore, the Tribunal reduced the disallowance made by the Assessing Officer from 90% to 50%, considering the facts and circumstances of the case.

In conclusion, the Tribunal partly allowed the appeal of the assessee by modifying the order of the ld. CIT(Appeals) and restricting the disallowance of salary and bonus expenditure to 50%. The order was pronounced in the open court on January 08, 2020.

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