2016 (6) TMI 596

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....irectors of the company under Section 40A(2) of the Income Tax Act, 1961 ("the Act" for short). Before the Assessing Officer, the assessee had taken two principal contentions. First was that the remuneration paid to the directors was commensurate with the service rendered by them and the same was in no manner excessive. According to the assessee, therefore, Section 40A(2) of the Act would not apply. The other contention of the assessee was that in any case, the company as well as the Directors were both assessed tax at the rate of 30% and therefore, in any case, the issue was revenue neutral. 2. The Assessing Officer discarded both the contentions. Regarding first contention, he opined that there was huge rise in the Directors' remun....

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....higher remuneration to the Directors was justified, the assessee had canvassed that in any case, the tax having already been paid on such income by the Directors, the Revenue cannot again tax the company for the same income. Unfortunately, the Tribunal did not examine this contention at any length. 5. Against judgment of the Tribunal, the present Tax Appeal was filed. At the time of admission, by an order dated 31.3.2015, the Division Bench of this Court rejected the assessee's contention against invocation of Section 40A(2) of the Act, nonetheless admitted Tax Appeal confining it to the alternative contention of the assessee and framed the following substantial question of law: "(ii) Whether on the facts and in the circumstances ....