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2014 (11) TMI 145 - ITAT AHMEDABADDirector’s Remuneration disallowed – Exceptionally high remuneration paid - Held that:- The assessee company is engaged in the business of manufacturing of packing machines Directors’ remuneration during the year has been increased to ₹ 80,30,178/- from ₹ 9,00,000/- paid in the immediately preceding year - Thus, the increase in remuneration is about 9 times of the Director’s remuneration paid in the immediately preceding year - The huge increment ought to be justified on the basis of increase in business turnover which is about 3.6 times as compared to immediately preceding year - the lower authorities have allowed the Director’s remuneration during the year under consideration at ₹ 9,00,000/- which is exactly the same amount of Directors’ remuneration which was paid in the immediately preceding year - the inference of the lower authorities cannot be sustained, especially when it is observed that the assessee-company’s turnover has increased to 3.6 times i.e. from ₹ 99,80,414/- to ₹ 3,61,38,065 - In the background of such increase in turnover of the assessee-company, the contention of the assessee that the same was the result of hardwork put in by the Directors cannot be ruled out - some increase in remuneration to Directors for their hard-work is certainly justified and reasonable - However, the increase in Directors’ remuneration to about 9 times cannot be justified on the basis of above increase in the turnover - it shall be fair and reasonable, keeping in view the increase in turnover to 3.6 times, the increase in Directors’ remuneration to 3.6 times of the immediately preceding year is justified – Decided partly in favour of assessee. Amount received to be treated as income or not as per Explanation to section 153 r.w.s 150 – Held that:- The AO observed that the assessee has claimed to have received advance of ₹ 21,74,747/- from Happy Yammy Foods & Beverages - The assessee explained that the advance was received for manufacturing and supply of ice cream balls machinery and that final discussion was awaited from the party and that semi-finished machine was shown as work in progress - the CIT(A) correctly decided that the amount cannot be deemed as income of the year under consideration by invoking provisions of Section 68 of the Act - the further direction given by the CIT(A) to deem ₹ 6,03,954/- as income of the AY 2006-07 and ₹ 15,70,793/- as income of the AY 2007-08 was not in accordance with the provisions of Section 153(3) of the Act – relying upon CIT, SHIMLA Versus M/s GREENWORLD CORPORATION and M/s THE GREEN WORLD CORPORATION Versus ITO, PARWANOO & ANR. [2009 (5) TMI 14 - SUPREME COURT OF INDIA] – wherein it has been held that as regards the expression “direction” in Section 153(3)(ii) of the Act, it must be an express direction necessary for the disposal of the case before the authority or court - It must also be a direction which the authority or court is empowered to give while deciding the case before it - The expressions “finding” and “direction” in Section 153(3)(ii) of the Act must be accordingly confined - Section 153(3)(ii) is not a provision enlarging the jurisdiction of the authority or court - no specific opportunity of hearing was allowed by the CIT(A) to the assessee before issuing the further direction – thus, the direction of the CIT(A) is set aside – Decided in favour of assessee.
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