TMI Blog2014 (1) TMI 1496X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO for invoking section 40A(2)(a) to initiate action to disallow or refuse to deduct the excessive or unreasonable expenditure mentioned thereunder - But at the same time, before taking any final decision by invoking the power under section 40A(2)(a), either allowing or disallowing such expenditure incurred as excessive or unreasonable, such decision of the Assessing Officer should be based on reasons well- founded, which is judiciously acceptable and in which event the finding or decision arrived at stating that the expenditure is excessive or unreasonable and the same cannot be allowed or deducted. Both the authorities below have not given any finding with regard to the fair market value of the services rendered by Shri Vipul J.Ray ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax (Appeals)-I, Baroda presents this appeal against the said order on the following amongst other grounds:- 1. The order passed by the Hon'ble Commissioner of Income Tax (Appeals)-I is bad in law, contrary to legal pronouncements and same be quashed. The Hon'ble CIT(A)-I has erred in confirming the disallowance of Rs.4,80,000 out of Directors Remuneration by invoking provisions of Sec.40A(2)(b) of the Act. Your appellant submits that the Hon'ble CIT(A) has not appreciated the facts submitted during the course of hearing and has wrongly arrived at the conclusion about the unreasonable and excess remuneration paid to the directors. The same is unjust and uncalled for and be deleted. 2. Briefly stated facts are that the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parison with the Executive Director is not a correct approach. He submitted that the function and the duties carried out by Shri Vipul J.Ray are totally different and the Director Shri Vipul J.Ray has performed technical duties. He further submitted that both the authorities failed to appreciate the fact that by making payment of Rs.24 lacs to the Director, there is no effect on the tax as company has paid @ 30% and the Director has also paid @ 30%. He submitted that the intention of the Legislator to introduce section 40A(2)(b) of the Act was to ensure that the income of the payer is not reduced by paying higher salary or services to a relative and thus avoid tax. In the instant case, there is nothing on record to suggest that the hike in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s relied by ld.Sr.DR are as under:- Sl.No(s) In the case of.... reported/unreported in... 1. CIT vs. NEPC India Ltd. (2008) 303 ITR 271 (Mad.) 2. V.S.T. Motors Ltd. vs. CIT (2004) 135 Taxman 91 (Mad. HC) 3. Darshan Suman Zaveri vs. ITO (2000) 73 ITD 318 (Ahd.ITAT) 4. Shanti Lal Jain vs. CIT (2012) 21 taxmann.com 261 (Raj.HC) 4. We have considered the rival submissions, perused the records and gone through the orders of the revenue authorities. The AO made disallowance on the basis that qualifications of Shri Vipul J.Rai as narrated by the assessee did exist in the immediate previous year also. It does not justify such huge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t value of the services rendered by the employees and how it can be termed as excessive or unreasonable. The decisions relied upon by the Sr.DR do not help to the Revenue as the ratio laid down in the case of CIT vs. NEPC India Ltd.(supra). The Hon'ble High Court has held that what section 40A(2)(a) contemplates is that there should be some material available before the AO for invoking section 40A(2)(a) to initiate action to disallow or refuse to deduct the excessive or unreasonable expenditure mentioned thereunder. But at the same time, before taking any final decision by invoking the power under section 40A(2)(a), either allowing or disallowing such expenditure incurred as excessive or unreasonable, such decision of the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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