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2016 (9) TMI 955 - AT - Income TaxDisallowance of salary paid to the Director by applying the provisions of Section 40A(2) - Held that:- Assessing Officer has disallowed the salary increase in the salary by invoking the provisions of Section 40A(2) which mandates that in case the Assessing Officer of the opinion that an expenditure is excessive or unreasonable having regard to Fair Market Value of goods; services or facilities for which the payment is made or legitimate need of the business or profession so much of the expenditure as was considered excessive or unreasonable salary shall not be allowed as a deduction. Thus once the Assessing Officer has to form an opinion that a particular expenditure is excessive or unreasonable. The formation of opinion should be based on having regard to the fair market value of the services or goods. However the Assessing Officer has not conducted such enquiry but disallowed the salary of the same director in the earlier year. It is pertinent to note that when the salary paid to the Director is still less than the salary paid to the other Directors during the year under consideration then the provisions of Section 40A(2) cannot be invoked. It may be a case that this particular Director was under paid in earlier year and just to bring the parity of the salary with the other Directors the salary of the Director was increased during this year. In view of the above facts as well as decision of this Tribunal in assessee's own case (supra), the disallowance made by the Assessing Officer is not justified and the same is deleted. Addition made on account of difference between the balances in the accounts of M/s. Kayen Print Services Pvt. Ltd. and M/s. UPM Kymmene India Pvt. Ltd. - Held that:- It is manifest from the record that the assessee failed to explain the differences in the balance outstanding in the accounts of these two parties as per the confirmation of accounts by these parties. Before the Tribunal the assessee has explained the differences due to certain investments that were not taken into consideration by these parties however in the absence of the relevant evidence produced before the authorities below for their examination and verification this explanation of the assessee cannot be accepted at this stage
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