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2019 (2) TMI 1128

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....ur of assessee. 5. We have heard both the parties and we have also perused the material placed on record as well as the orders passed by revenue authorities. We find that the identical ground has already been decided by the Coordinate Bench of Hon'ble ITAT in ITA No. 7171/Mum/10 (for AY 2007-08), 7141/Mum/11 (for AY 2008-09), 1576/Mum/13 (for AY 2009-10) and 3949/Mum/14 (for AY 2010-11) in assessee's own case. The operative portion of the order of Hon'ble ITAT passed in ITA No. contained in para no. 2 to 8, which is reproduced below:- 2. The only common issue arising for consideration in these appeals by the assessee is disallowance made under section 40A(2)(a) of the Income Tax Act, 1961 (for short "the Act") on account of payment of remuneration to whole time directors. Since, facts relating to the issue in dispute are identical in all the appeals, for the sake of convenience we will advert to the facts as involved in ITA no.7171/Mum./2010. 3. Brief facts are, the assessee company publishes a newspaper in Vernacular language. As stated by the assessee, it is carrying on such activity for more than 150 years. For the assessment year under dispute, the assessee filed its retu....

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....fficer observed, in assessment year 2003-04, wherein, the assessee has shown profit of Rs. 2,27,00,000 remuneration of Rs. 21,00,000 was paid to the directors. He observed, in assessment year 2004-05 remuneration was increased by almost 80% to Rs. 37,50,000. He observed, considering the time span and services rendered over a period of time and commensurate rise in the directors' remuneration up to assessment year 2007-08 from assessment year 2003-04, which was taken as the base year, increase of 80% would be reasonable for the impugned assessment year. Thus, the Assessing Officer restricted payment of remuneration to three directors at Rs. 36,50,000 as against remuneration paid of Rs. 1,44,00,000. This resulted in disallowance of Rs. 1,06,50,000. Being aggrieved of the aforesaid disallowance, the assessee preferred appeal before the first appellate authority. 4. The learned Commissioner (Appeals), however, sustained the disallowance made by the Assessing Officer. In the like manner, the Assessing Officer completed assessments for assessment year 2008- 09, 2009-10 and 2010-11. The only difference being in the quantum of remuneration allowed by the Assessing Officer at Rs. 48,00,0....

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....ct. The learned Sr. Counsel submitted, the very fact that the assessee had paid remuneration to the concerned directors in the preceding assessment years and at a much higher rate, goes to prove that the remuneration paid in the impugned assessment year is neither excessive nor unreasonable. As regards the observations of the Assessing Officer that to avoid the mischief of section 2(22)(e) of the Act the assessee has paid remuneration to the directors, the learned Sr. Counsel submitted, such observations of the Assessing Officer is fallacious considering the fact that the three directors to whom remuneration was paid are holding, in total, 15% shares of the company. Whereas, 85% other shareholders are there to whom the assessee would otherwise have to pay dividend. The learned Sr. Counsel submitted, the object behind introducing section 40A(2) to the Act is for preventing evasion of tax. He submitted, in the facts of the present case, there is no such occasion for evasion of tax considering the fact that ultimately the Assessing Officer has determined loss in all the assessment years and moreover the directors to whom remuneration was paid have not only offered such income in the r....

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....s stated that the remuneration paid to the three directors in assessment year 2003-04 was Rs. 21 lakh, in assessment year 2004-05 is Rs. 37.50 lakh, in assessment year 2005-09 Rs. 90 lakh and in assessment year 2006-07 is Rs. 1.56 crore. Thus, as could be seen from the facts on record, over the years there is incremental increase in payment of remuneration to the directors. It is not a fact that there is a quantum jump in payment of salary in the impugned assessment year only. Further, it is relevant to observe, payment of remuneration to the directors have been accepted by the Assessing Officer in past assessment years while completing scrutiny assessments under section 143(3) of the Act. This is evident from the copies of the assessment orders for assessment years 2001-02, 2003-04 and 2004-05 placed before us. In fact, while completing the scrutiny assessment for assessment year 2006-07 under section 143(3) of the Act, which is evident from the assessment order dated 16th December 2008, the Assessing Officer has allowed payment of remuneration of Rs. 1.56 crore against loss determined at Rs. 3,16,68,518. Therefore, in comparison to payment of remuneration in assessment year 2006-....