TMI Blog2012 (6) TMI 689X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the assessee on receipt of such services or facilities. Hence, in absence of material on record to hold that payment of remuneration @ ₹ 3 lacs pm to the director was excessive or unreasonable, CIT(A) was justified in deleting the addition - Decided against the Revenue. - IT Appeal NO. 4631 (DELHI) OF 2011 - - - Dated:- 22-6-2012 - G. C. Gupta And A. N. Pahuja , JJ. ORDER A. N. Pahuja, Accountant Member. This appeal filed on 20.10.2011 by the Revenue against an order dated 29.06.2011 of the CIT(A)-XII, New Delhi, raises the following grounds:- (1) The ld. CIT(A) erred in law and on facts of the case in deleting the addition of ₹ 30 lacs on account of Directors remunera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of salary paid to the director in terms of provisions of the section 40A(2)(a) of the Act, the assessee replied that Shri Patanjali Keswani was a highly qualified individual, having B.Tech. from IIT and MBA from IIM beside having a experience of 15 years in Taj Group Hotels as chief operating Officer and Vice President with A.T. Kearney Inc. as their Director India. The remuneration paid to shri Keshwani was due to business exigencies and substantial profits were earned by the assessee company. Moreover, the assessee raised funds to the tune of ₹ 28.93 crores, deployed in giving loans, making investment in mutual funds and setting up of hotels. Since shri Keshwani was paying tax at maximum rates, it could not be said that payment of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted parties are more than the fair market value. In this case the Director Keshwani himself is a professional as he is B-Tech from IIT and as well as MBA from IIM along with experience in Taj Group of Hotel as Chief Operating Officer and Vice President with A.T. Kearney Inc. as their Director India. The Director himself is a professional who with his professional expertise steered the company and earned profits well while comparing with the last two years. Hence, the addition of 30 lacs is deleted. 5. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A).The ld. DR supported the assessment order while relying upon the decision in CIT v. Eastern Condiments (P.) Ltd. , 325 ITR 251 (Ker.). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to the assessee therefrom. Hon'ble Gujrat High Court observed in Coronation Flour Mills v. ACIT , 188 Taxman 257 that in relation to the disallowance under the provisions of section 40A(2)(a) of the Act, a plain reading of the provision reveals that where an assessee incurs any expenditure in respect of which payment is required to be made or has been made to any person referred to in clause ( b ) of section 40A(2) of the Act and the AO is of the opinion that such expenditure is excessive or unreasonable having regard to ( a ) fair market value of the goods, services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e legitimate needs of the business of the assessee; or ( c ) the benefits derived by or accruing to the assessee on receipt of such services or facilities. The AO while making the disallowance observed that disallowance was made keeping in view quantum and nature of business of the assessee. But how quantum or nature of business affected payment of salary to its director, has not been elaborated. No businessman can be compelled to maximize his profit. The income-tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman. Not a whisper has been made by the AO in respect of any of these thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. On further appeal, the Hon'ble High Court found that the Tribunal had not cared to consider any of the findings of the AO and had assumed the claim of the assessee that the additional discount was attributable to the packing cost incurred by the managing director, as true. In order to prove that the managing director was left with packing for export and sale of the commodity locally, it was for the assessee to prove that sales were in bulk quantity and the managing director was engaged in the packing. The finding of the AO was that the managing director had purchased certain machinery only in December, 2000 whereas goods purchased from the assessee were from April, 2000 onwards. It was the further finding of the AO that the goods, w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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