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2017 (5) TMI 1106 - AT - Income TaxDisallowance on account of salary and bonus paid to the Director - Held that:- After the appointment of Mr. Abhinav Kumar, due to his tremendous efforts and business generating capability the turnover of the company in the A Y in question grew by more than 18 times as compare to last FY. Further the total receipts of the assessee company rose from ₹ 42.81 Lacs in FY 2007- 08 to 831.73 Lacs in FY 2008-09. Further the personnel expenses reduced from 34.71 % of the total turnover in FY 2007-08 to 19.37% the provisions of section. Therefore, to appreciate the efforts of Mr. Abhinav Kumar, Director of the Company and for above mentioned reasons the Bonus was decided by the Board of Directors of the assessee company vide Resolution dated 16.3.2009 at ₹ 50,00,000/- lacs, which within the provisions of the Companies Act 1956 read with Income Tax Act 1961, which was reasonable and justified. We find considerable cogency in submission of the Ld. Counsel of the assessee that Section 40A(2)(a) cannot be invoked and have no application unless it is first concluded that the expenditure was excessive or unreasonable. We further note that the AO in the assessment order as well as Ld. CIT(A) in enhancement notice, erred in deciding the amount of salary and bonus of Mr. Abhinav Kumar, as the reasonableness of the remuneration has to be considered from the point of view of a Company and it was not open to the Assessing Officers as well as Ld. CIT(A) to adopt a subjective standard with regard to the proper remuneration which should be paid to its Directors. - Decided in favour of assessee.
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