AI Drafter 
TaxTMI 
TaxTMI 
2019 (2) TMI 348
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....ve ground challenges correctness of sec.40A(2) disallowance of salary paid to its directors to the tune of Rs.5.50 lac. There is no dispute that the impugned sum represents payments made to assessee's three directors, namely, Shri Shantilal Saraf, Smt.Rakhi Saraf, and Smt. Sushma Jain amounting to Rs.3 lac each in case of former two and Rs. 1lac in third payee case; respectively. The CIT(A) has partly affirmed the Assessing Officer action as follows:- "3. The Ld. AIR has submitted the following- "This ground of appeal is in respect of disallowance of Rs. 5,50,000/- under section 40A(2) of the Income Tax Act, 1961 on account of part director remuneration/ salary. During the financial year ended on 31-03-2012 the appellant c....
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....g previous year. That in the immediately preceding previous year the company has incurred remuneration/salary to the tune of Rs. 11,00,000/ -. That all the expenditures are on the lower side as compare to the preceding previous year. That the remuneration/ salary paid to the directors are as per the resolution approved and passed in the board meeting. The details of working responsibility allotted to the directors, their qualification, experience etc are enclosed herewith. That all the directors are income tax payee and the remuneration given to them is considered in their income tax return. The copy of computation, income tax acknowledgement etc. of all the directors for the year under consideration is enclosed herewith. That the ....
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....remuneration/salary was more than current previous year and to discharge the day to day affairs of the company the directors were wholly responsible. The Learned Assessing Officer has also not considered the qualification, job responsibility and their capability to discharge their duties. The Learned AO has not judged the reasonableness of the remuneration/salary from the point of view of a businessmen i.e the appellant and that such remuneration has been approved by the board of directors by resolution passed in their meeting. Further the said action done was within the provisions of the Companies Act, 1956 and there was no violation of any prevalent law of land. Sir, we would like to place reliance on Hon'ble Calcutta High Co....
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....rector, In our view, the Tribunal was clearly in error in holding that only a part of the increased remuneration for the assessment year in question should be allowed." Sir, In the case of Hive Communication Put. Ltd. Versus Commissioner Of Income Tax [2013} 353 ITR 200 (Del). Hon'ble Delhi High Court Decided the question in favour of the assessee and in the negative holding that the Tribunal was not correct in law in upholding disallowance of Rs. 13.20 laes out of remuneration paid to Mr. Sushil Pandit (director) by invoking the 'provisions of Section 40A(2) of the Act. Sir, Hon'ble Allahabad High Court in Abbas Wazir (P) Ltd. Vs. CIT (2004) 265 ITR 77 (AIl). wherein the High Court held as under "In Newtone St....
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....red from the angle of a prudent businessman. The term "benefit" to a company in relation to its business, it must be remembered, has a very wide connotation and may not necessarily be capable of being accurately measured in terms of pound, shillings and pence in all cases. Both these aspects have to be considered judiciously, dispassionately without any bias of any kind from the view-point of reasonable and honest person in business. "The aforesaid judgment of Calcutta High Court was affirmed by the Apex Court in Cit Vs. Edward Keventer (Private) Ltd. (1978) 115 ITR 149 (SC) Sir. similar view is held by the Madras High Court in CIF Vs. Computer Graphics Ltd. (2006) 285 ITR 84. In the same line is the judgment of Bombay High Court i....