TaxTMI 
TaxTMI 
2015 (5) TMI 503
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....Ld. CIT(A) has erred in deleting the addition of Rs. 2,70,000/- made on account of rent paid by Mrs. Shobna Bhatia in her individual capacity." 2. Ld. D.R. at the outset submitted that there were 4 grounds of appeal. The first ground of appeal relates to excessive salary paid by assessee to its director and therefore, the A.O. has rightly made the addition u/s 40A(2)(b) of the Act. In support of his arguments, the Ld. A.R. submitted that the assessee was not able to demonstrate as to how the salary paid to directors was not excessive. He submitted that Assessee Company was already having competent and able staff to run its day to day operations and, therefore, huge amount of salary paid to directors was excessive and unreasonable. 2.1 Regarding 2nd ground of appeal Ld. D.R. submitted that the assessee was imposed a penalty by ICICI Bank amounting to Rs. 2,67,453/-, which had not been added back to its income. Ld. D.R. submitted that Form 3CD issued by auditors of company has clearly mentioned that penalty was imposed by ICICI Bank and, therefore, the A.O. had rightly made the addition. 2.2 Arguing upon 3rd ground of appeal, Ld. D.R. submitted that huge expenditure amountin....
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....hat it was incumbent on the part of A.O. to make disallowance u/s 40A(2)(b) for payments made to them after comparing with the fair market value of the services obtained from the directors. In this regard, reliance was placed on the case law of CIT Vs Modi Revelon Pvt. Ltd. 210 Taxman 161. He further submitted that no disallowance u/s 40A(2)(b) can be made if the remuneration is as per the provisions of Companies Act, 1956. He submitted that the assessee company being a private limited company cap as provided by Section 309 is not applicable as sub-section (9) to Section 309 clearly states that capping on remuneration does not apply to private limited companies. Moreover, he submitted that there was no tax avoidance as the assessee was taxed at an effective rate of 30.90% whereas the Directors were taxed at a higher rate of tax i.e. @ 33.99%. In this respect, he invited our attention to paper book pages 49-51 where computation of salary of both the directors was placed. 3.1 Regarding 2nd ground of appeal, Ld. A.R. submitted that the assessee company was engaged in the business of providing support services to entertainment and media business and the amounts charged by ICICI bank....
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....ayments of salary made to them so as to make disallowance u/s 40A(2)(b) of the Act. Regarding the issue of rent, Ld. D.R. submitted that copy of license agreement placed at paper book 111 clearly mentions that the property rented is residential accommodation and there is no mention of fact that the accommodation was taken by Assessee Company. He submitted that everywhere in the agreement it is noted that Smt. Shobhna Bhatia has taken the property on rent and therefore there was no question of agreement having been made by Smt. Shobhna Bhatia as agent of the company. 5. We have heard rival parties and have gone through the material placed on record. As regards the 1st issue of disallowance u/s 40A(2)(b) of the Act, we find that the assessee company had just started the business in an earlier year and during the current year only the appellant could secure success by obtaining contracts for ticketing for IPL matches at Mumbai and Delhi etc. It is also observed that the promoter directors were highly qualified and experienced professionals and the professional work done by these two directors cannot be measured by record of day to day affairs of the company. Moreover, we observe th....
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.... incurred in the normal course of business. Ld. CIT(A) has allowed relief to the assessee by holding as under: "5.3 Regarding disallowance of Rs. 2,67,453/ on account of penalty charges levied by the ICICI Bank, the appellant submitted that such charges were in the normal course of the business and hence were allowable business expenses under section 37. The Ld. Counsel informed that for the purpose of E-ticketing for the IPL events, the appellant had designed a portal titled "KAYZOONGA.COM" which allowed online purchase of tickets of IPL and other events. For this purpose, the payments were made through the ICICI Bank. It was informed that being a relative new portal, the same was not free from technical faults and therefore, in the current year sometimes the purchase of tickets made by a client through the portal led to making debits in their bank accounts for more than one occasion. Accordingly, the excess amount, which were charged due to the above technical fault was to be re-paid to the customers. However the ICICI Bank, which had to bear additional administrative cost due to the said portal fault, used to charge for such instances. This was termed by the bank as pen....
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....fact in his order which is apparent from para 5.4 of his order which is reproduced below: "5.4 Regarding the disallowance out of Advertisement expenses of Rs. 62,10,336/- the Ld. Counsel informed that the aforesaid expenses were incurred towards advertisement and publicity expenses for hoarding cites in New Delhi, Calcutta, Mumbai and Bangaluru for the purpose of making publicity for sale of tickets for specific events for which the appellant had company begged the contracts. The Ld. Counsel vehemently contested observation of the Ld. AD that such hoardings will remain in place for several years and thereby the appellant will get benefit of enduring nature. It was informed that the purpose of such advertisements was to make people aware that tickets are available for sale for a particular match on the companies' portal and thus the validity of the advertisement was only till the time the tickets of the events were being sold and in any case certainly not beyond the date of the event and thus such publicity was for short time. The Ld. Counsel furnished before me a copy of the invoices for M/s Alakh advertisement to whom the payment of advertisement was made, which shows that the....