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2023 (11) TMI 992 - ITAT SURATDisallowance u/s 14A - CIT(A) deleted addition observing assessee has own sufficient funds for making investments which generate exempt income - HELD THAT:- This ground raised by the Revenue is squarely covered in assessee’s own case, by the order of the Tribunal [2019 (7) TMI 2002 - ITAT SURAT] as held assessee is having a owned funds to the extent of 436 crores as on 31.03.2013 investments made by the assessee to generate the exempt income only to the extent of 8.05 crores. Therefore, the ld.CIT(A) reasonable presumed that assessee has invested only own funds no borrowed funds. By considering the facts and circumstances of the case, we find that there is no error passed in the order passed by ld.CIT(A), therefore ground raised by the Revenue is dismissed. Disallowance of salary expenses u/s 40A(2)(b) to relatives of the Directors - No substantial educational qualification of 4 lady members who have been given the salaries[shareholders of company] - also they do not have substantial educational qualification and do not have special skill related to diamond, except the long association with assessee-company - HELD THAT:- We note that assessee is in the business of manufacturing of polished diamond out of rough diamonds and for that skill is acquired by virtue of experience only. Thus, AO put more emphasis only on education, however, we note that education is different than the experience. In most of the Industries, a person is paid higher salary by virtue of his experience in that Industry. Besides, we note that the payment of salary was made by assessee month-to-month basis and subject to TDS deduction. The salary is paid by cheque. Employees to whom the salaries are being paid are taxed in the higher bracket of 30 % tax rate hence there is no motive to reduce the tax of the company by paying the said salaries. We note that diamond business is a peculiar nature of business and for that confidential and reliable persons are very much required, therefore, assessee would decide that who is reliable persons for his business and how much salary is to be paid. AO cannot sit on the arm chair of the assessee-company`s Board of Directors and decide that who is reliable persons and how much salary is to be paid for the loyalty. Hence, we note that payment of salary by assessee does not exceed the fair market value prevailing in the market. Therefore,payment of salary is fully justified, and addition sustained by ld CIT(A) is reasonable. Decided against revenue.
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