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2023 (4) TMI 366 - AT - Income TaxUnexplained paid up share capital u/s. 68 - assessee failed to submit copy of bank account and income tax return of the share subscriber company - HELD THAT:- Assessee has sufficiently explained the identity and creditworthiness of the share subscriber it being a sister concern and the genuineness of the transaction for which nothing contrary has been brought on record by the Revenue. We do not find any merit in the finding of CIT(A). We accordingly, allow ground no. 1 taken by the assessee and direct to delete the addition so made - Accordingly, ground no. 1 is allowed. Addition on account of directors’ remuneration being treated as excessive u/s. 40A(2) - As argued authorities below have not brought out any contrary material except their own observations which are based on surmises and conjecture, to demonstrate that the remuneration paid to the directors is excessive - HELD THAT:- We note that directors’ remuneration paid by the assessee against the turnover and net profit of the assessee in past five years demonstrate the legitimacy of the expenses incurred by the assessee and the benefits derived by it from the same. Payment made to directors is not bogus for which nothing has been brought on record by the Ld. AO. Thus, we are in agreement with the submission of that once it is established that remuneration has been paid to directors then Revenue cannot put itself in the arm chair of a businessman to assume the role of ascertainment, how it is a reasonable remuneration having regard to the facts and circumstances of the case. Matter of commercial expediency should be left to the businessman concern or the board of directors - We direct to delete the disallowance made - Accordingly, ground no. 2 is allowed. Addition u/s 40A(3) - as submitted that assessee made reimbursement of expenses incurred by the two advocates on behalf of the assessee - HELD THAT:- As from the perusal of the order of Ld. CIT(A), we take note of the facts which have been tabulated, giving all the explanations and details for the payment made to the two advocate professionals towards reimbursement of expenses incurred by them on behalf of the assessee. We do find force in the submission made by the Ld. Counsel explaining the case of the assessee as stated above and accordingly, direct for the deletion of disallowance made in this respect. Accordingly, ground no. 3 is allowed. Addition being prior period expenditure not allowable in the year under consideration - HELD THAT:- As we note that details of these expenditure are tabulated which relate to service charges, site maintenance, construction expenses and generator running and maintenance expenses for which claim of these expenses were submitted before the assessee by respective service providers after the close of accounting year and, therefore, the assessee claimed the expenses in the year under consideration. All these expenses are legitimate business expenses allowable u/s. 37(1) - Ld. Counsel also placed reliance on the decision of coordinate bench of ITAT, Mumbai in the case of Kellogs (India) Pvt. Ltd. [2012 (12) TMI 664 - ITAT MUMBAI] - we are inclined to direct for deletion of the addition made by the authorities below. Accordingly, ground no. 4 is allowed. Addition u/s. 36(1)(iii) - interest free advances - Counsel submitted that this disallowance has been made without establishing that borrowed fund were utilised in making interest free advances - HELD THAT:- Assessee has its own interest free funds which are substantially more as compared to the interest free advances given by it, which does not have any adverse impact on the claim of interest expenditure made by it in the P&L Account. Considering the over all facts and circumstances of the case and the explanation furnished by the Ld. Counsel, we direct to delete the addition made in this respect. Accordingly, ground no. 5 is allowed. Addition on account of sponsorship expenses by treating the same as donation - assessee has claimed business promotion expenses which have been incurred by the assessee by way of contribution to various association and bodies and temples for festive occasions - HELD THAT:- The expenses incurred by the assessee are not held to be bogus or have been doubted by the authorities below. Accordingly , we are inclined to allow the claim of the expenses by the assessee and thus direct for deletion of addition made in this respect. Accordingly, ground no. 6 is allowed.
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