TaxTMI 
TaxTMI 
TaxTMI 
2015 (7) TMI 868
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.... Alleged Directors' excess Remuneration of Rs. 29,63,051: (1) The learned C.I.T. (A) erred in law and in fact as well in confirming disallowance made by A.O. for alleged excess remuneration of Rs. 29,63,051 paid to the Directors. (2) The C.I.T.(A) erred in not appreciating that the A.O. made the disallowance simply relying on Remark in Auditors' Report dt. 26.08.2010, disregarding subsequent sanctions granted by the Central Govt. available with him while dealing with the appeal, and further not appreciating that the Central Govt. is vested with the authority to sanction the excessive remuneration paid or to be paid to the Directors. (3) The C.I.T.(A) has not appreciated the Auditors' remark in correct perspective. (4) Th....
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....essee as to why the excess remuneration paid to the directors should not be disallowed in view of the auditors' comments and past history of the case. In response, the assessee submitted that an application to the Central Government for approval of excess remuneration to the directors was filed and the same was approved. The Assessing Officer, however, did not accept the reply of the assessee company and proceeded to add the excess remuneration of ` 29,63,051, paid to the directors to the total income of the assessee company. 3. Being aggrieved, the assessee carried the matter before the first appellate authority, wherein the learned CIT(A) confirmed the order passed by the Assessing Officer by observing as follows:- "5.1 I have carefully....
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....t part of which may be reproduced as under:- "Before proceeding further, for the sake of convenience and ready reference, relevant part of provision of section 309 of Companies Act 1962 is reproduced as under: (5A) If any director draws or receives, directly or indirectly, by way of remuneration any such sums in excess of the limit prescribed by this section or without the prior sanction of the Central Government, where it is required, he shall refund such sums to the company and until such sum is refunded, hold it in trust for the company. (5B) The company shall not waive the recovery of any sum refundable to it under section sub-section (5A) unless permitted by the Central Government. In the instant case, as mentioned in the asses....
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....id appeal order of my Ld. predecessor, nor I find any reason to deviate from the reasoned finding of my predecessor. Having regard to the totality of facts and circumstances of the case, as the facts are identical to earlier year, I agree with my predecessor that the excess remuneration is not deductible expenditure, therefore, disallowance of Rs. 29,63,051/- worked out by the LAO vide para 4 and 5 of the relevant assessment order appears justified, hence the same is confirmed. Therefore, the aforesaid ground no.1 of appeal is dismissed." Aggrieved by the aforesaid order passed the learned CIT(A), the assessee is in further appeal before the Tribunal. 4. Before us, the learned Counsel for the assessee submitted that the issue of excess r....
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....ntical issue had arisen in the earlier A.Y also. While deciding the appeal for that year(ITA/ 378/Mum/2012-dt. 13.03.2015,we have decided the issue as under: "6. Next ground of appeal is about excess remuneration, amounting to Rs. 36.40 lakhs, paid to Director. During the assessment proceedings, the AO found that the auditor inform no.3CB, vide note no.3,had reported that the assessee had paid Rs. 36,40,038/- in excess of limits prescribed under the Companies Act. He asked the assessee to show cause as to why such excessive remuneration paid in contravention to the provisions of the companies Act should not be disallowed uls.37(1) of the Act. After considering the submission of the assesse, the AO held that there was no dispute about the ....
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....sive remuneration paid, that the excessive remuneration was not allowable u/s. 37(1) of the Act, that it was paid over and above the prescribed limits of the Companies Act. He confirmed the disallowance made by AO. 8. Before us, the AR argued that the Central government had allowed payment of excess remuneration to the Directors that sanction letter was made available to the FAA, that provisions of Explanation to section 37(1) were not applicable with regard to the payment. He referred to the page no.38 of the paper book. He also relied upon the order of the Tribunal delivered for the year 2001-02 to 2004-05 wherein alleged excessive remuneration to the Directors disallowed u/s. 40A (2) (b)of the was deleted. DR supported the order of the....