2014 (6) TMI 325

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....e appellant's directors without appreciating the facts and circumstances of the case. 2. The ld. CIT(A) failed to appreciate that the salary and commission is paid to the appellant's director as per the article of association of the appellant's in lieu of their services rendered by them. Hence, the disallowance is not at all justified; 3. The ld. CIT(A) failed to appreciate that the entire salary and commission paid to the appellant's director is wholly and exclusively laid out for the purpose of the appellant's business. Hence no part of the expenditure can be disallow as excessive and unreasonable, The disallowance of Rs.2,11,858/- is not at all justified and the same may be deleted; 4. The ld. AO has disallowed the above amount ....

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....rred an expenses of Rs.6,36,666/- on travelling and conveyance mostly on common director's travel between these two companies located at different places. It was noticed that the total salary debited on account of salary paid to those directors was a sum of Rs.23,53,980/- which was debited in its entirety to the assessee-company. It was also noticed that the assessee company's office is situated at Mumbai and its income is taxable whereas the income of its sister concern was eligible for deduction u/s 80IB of the Act and therefore, the AO observed that the assessee has opted to debit full salary in the account of the assessee company books and preferred to reduce its taxable income. The AO worked out proportionate disallowable salary pertai....

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....and both the companies are separated entities under the Companies Act. 6. In the grounds of appeal, it has been mentioned that the salary is disallowed by the AO on the basis that such expenditure was not debited to profit and loss account of its sister concern and is excessive or unreasonable while comparing with the assesseecompany and thus erred in adopting Premier Hollowers as yardstick and the ld. AO failed to appreciate the fact that both the companies are separate legal companies formed under the Companies Act and have the separate books of account. It is also the case of the assessee that even before commencement of group company i.e of M/s Premier Hollowares Pvt Ltd (incorporated on 24.3.1997) those directors were being paid rem....