2012 (5) TMI 142

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.... company and erred in ignoring the provision of the Company's Act, 1956 u/s 198 which has wide implication over corporate functioning. The said section 198 is a comparable adopted by the AO to disallow the excess payments made to Directors u/s 40A(2B) which is reasonable parameter for comparison." 3. During the course of assessment proceedings, the AO noted that the assessee had paid the remuneration of Rs. 22,84,800/- to its directors. The AO asked the assessee to explain as to why the said remuneration was allowable u/s 40A(2) and section 37 of the Act, and also as to why the remuneration should not be restricted to 11% of the net profit. The assessee explained that the Directors were well qualified and technically competent and placed a....

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....e are not enough facts and evidence to consider invoking of section 40A(2) or section 37(1) in this case. The disallowance made is, therefore, deleted." 4. Aggrieved by the order of the CIT(A), the revenue is in appeal before us.   5. The learned DR relied upon the order of the AO and the learned counsel for the assessee placed reliance on the order of the CIT(A). 6. We have heard the rival submissions, perused the record and gone through the orders of the authorities below. The CIT(A) gave a categorical finding that the AO had not brought any other fact, evidence or argument while questioning the quantum of remuneration and commission paid to Directors. He further gave a finding that the provisions of section 198 have no applicatio....