TaxTMI 
TaxTMI 
2013 (5) TMI 386
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....and immediately filed before the Tribunal. The application is also supported with an affidavit of the accountant, wherein it has been stated that though the fees for filing of appeal was well deposited in time with the Tribunal, due to oversight and the fact that he got busy with the time barring assessments of the assessee company for the A.Y. 2008- 09, the appeal could not be filed on time. It has been further stated that the delay in filing of appeal was due to bona fide error and not intentional. In view of the reasons given by the assessee as also the reasons mentioned above, the application for condonation of delay is hereby allowed and the delay of 36 days in filing the present appeal is hereby condoned. 3. Now coming to the merits of the case. The grounds of appeal read as under: "1. The Ld. CIT(A) erred in confirming the disallowance of incentive bonus paid to the Directors amounting to Rs.30,00,000 under section 40A(2)(b) of Income-tax Act, 1961. 2. The Ld. CIT(A) erred in confirming the disallowance of Rs.3,05,992 of depreciation claimed on Motor Car under section 32 of the Income-tax Act, 1961." The brief facts of the case are that the asse....
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....ared to earlier years, the turnover and net profit of the company during the relevant year increased substantially which justifies the incentives paid to the Directors. The Directors having paid taxes @ 30%, there was no basis for the AO to derive a conclusion that the assessee evaded payment of tax by alleged payment of incentives to its Directors. On the other hand, the learned DR relied on the findings of the AO and the learned CIT(A) on this issue. 5. After going through the record it is observed that the assessee company has paid incentives of Rs. 10 lacs each to its Directors Mr. Assan Sukhwani, Mr. Sushil Sukhwani and Mr. Ajay Sukhwani. Apart from the incentive, Mr. Ajay Sukhwani has been paid salary of Rs.3,60,000 as well as consultation charges of Rs.3,60,000. However, no salary or consultation charges have been paid to Mr. Assan Sukhwani and Mr. Sushil Sukhwani. The assessee in his written submissions before the learned CIT(A) has claimed that all the Directors are whole time Directors fully engaged in the business of the company and they do not have any other business income or salary income. The assessee has relied upon the return of income of the said Directors. Howev....
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....lready been paid salary of Rs.3,60,000 and consultation charges of Rs.3,60,000. The learned AR could not point out as to what extra services were provided or offered by Mr. Ajay A Sukhwani for which extra incentive of Rs.10 lacs was paid to him. It may be pointed out that apart from receiving the salary Mr. Ajay A Sukhwani has also received consultation charges from the assessee company. It may be further noted that the said Mr. Ajay A Sukhwani is claimed to be handling the affairs of the company being a Director. A lot of emphasis has been placed upon his qualification, experience and services given by him in managing the affairs and business of the company. He has been paid salary for it then how can the payment of any money as consultation charges for his services can be justified. Since the learned CIT(A) for the reasons recorded in his order has deleted the disallowance on account of consultation charges paid to Mr. Ajay Sukhwani along with other persons and the revenue has not preferred any appeal, we are not supposed to give any finding in respect of that matter. However, the point of argument which has emerged is that if a Director, who is already receiving his remuneration....
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....ess of the company. Taking into consideration the overall facts and circumstances and also the salary and professional fees received by the said two Directors from other companies to whom they are offering their services and also taking into consideration the fact that the other Director namely Ajay Sukhwani has been paid Rs. 3,60,000 as consultation charges during the year, an equal sum of Rs.3,60,000 to each of the above said two directors can be said to be justified and reasonable remuneration for their services to the assessee company. The expenditure of Rs. 3.6 lacs each paid to the said to Directors viz. Assan Sukhwani and Sushil Sukhwani is hereby held to be justified and the disallowance of expenditure made by the authorities below to that extent is hereby deleted whereas the disallowance of expenditure of Rs.6.4 lacs each out of Rs. 10 lacs paid to the Directors is hereby confirmed. 6. Now coming to the second issue regarding disallowance of depreciation of Rs.3,05,992 on three cars registered in the name of Directors. The learned AR before us has submitted that though the cars are registered in the name of the Directors, the said motor cars are shown in the books of the ....
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....he actual deed of conveyance was not yet executed by the Housing Board in favour of the assessee. The assessee made a claim u/s. 32 of the Act in respect of depreciation of buildings used for the purpose of the business of the assessee. The claim was rejected by the AO forming an opinion that the assessee had not become the owner for want of deed of conveyance in its favour. It was under such circumstances, the Hon'ble Supreme Court while interpreting the term "owned" as occurring in section 32(1)of the I.T Act has held as under: "In our opinion, the term "owned" as occurring in section 32(1) of the Income-tax Act, 1961, must be assigned a wider meaning. Anyone in possession of property in his own title exercising such dominion over the property as would enable others being excluded therefrom and having the right to use and occupy the property and/or to enjoy its usufruct in his own right would be the owner of the buildings through a formal deed of title may not have been executed and registered as contemplated by the Transfer of Property Act, the Registration Act, etc. "Building owned by the assessee" the expression as occurring in section 32(1) of the Income-tax Act....
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....the allottee. No third person intervenes. The part payments made by the allottee are with the intention of acquiring title. The delivery of possession by the Housing Board to the allottee is also a step towards conferring ownership. Documentation is delayed only with the idea of compelling the allottee to observe the schedule of payment." In this case, we may observe that the houses were allotted in the name of the assessee company and the possession of the same was also given to the assessee company. The assessee company exercised its domain over the property to the exclusion of all others but due to certain exigencies the conveyance deed could not be executed in the name of the assessee company as there was a fixed schedule of payment to be paid by the assessee company to the Housing Board. It was held by the Hon'ble Supreme Court that the delivery of possession by the Housing Board to the allottee towards conferring ownership. Documentation was delayed only with the idea of compelling the allottee to observe the schedule of payment. It was not the case that the houses were allotted in the name of the persons others than the assessee company. Not only the houses were allotted to....
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.... consideration and used the same for business cannot be denied the benefit of depreciation on the ground that due to some restrictions its transfer was not recorded in the name of the assessee under the Motor Vehicles Act. Thus, in the case laws relied upon by the learned AR, the common fact was that though the ownership and possession over the asset was transferred to the assessee, the title could not be registered due to certain exigencies, reasons, compulsions or omissions. However, in the case in hand, there was no restriction or compulsion or explanation for the assessee company as to why the cars had been purchased in the name of its Directors when, in fact, the assessee company wanted to have ownership and domain over the said cars. It is not the case where due to some reasons as explained above, the registration of the vehicle could not be transferred in the name of the assessee company, whereas the assessee company had been using the said vehicles being its owner and exercising its domain over the vehicles to the exclusion of all others. The assessee company without assigning any reasons, not only purchased the vehicle in the name of the Directors but also the said vehicl....