TMI Blog2015 (7) TMI 868X X X X Extracts X X X X X X X X Extracts X X X X ..... s, it cannot be said that the remuneration paid to the director is in excess of the limits prescribed under the relevant law. - Decided in favour of assessee. - ITA no.5960/Mum./2013 - - - Dated:- 22-7-2015 - Shri D. Manmohan and Shri Sanjay Arora, JJ. For the Petitioner : Shri Nishit Gandhi For the Respondent : Shri Sacchidanand Dubey ORDER Per Sanjay Arora, A.M.: The present appeal preferred by the assessee is directed against the impugned order dated 20th August 2013, passed by the learned Commissioner of Income Tax (Appeals) 9, Mumbai, for the assessment year 2010 11. The grounds raised by the Revenue are reproduced below: 1. Alleged Directors' excess Remuneration of ₹ 29,63,051 : (1) The learned C.I.T. (A) erred in law and in fact as well in confirming disallowance made by A.O. for alleged excess remuneration of ₹ 29,63,051 paid to the Directors. (2) The C.I.T.(A) erred in not appreciating that the A.O. made the disallowance simply relying on Remark in Auditors' Report dt. 26.08.2010, disregarding subsequent sanctions granted by the Central Govt. available with him while dealing with the appeal, and further not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned CIT(A) confirmed the order passed by the Assessing Officer by observing as follows: 5.1 I have carefully considered the facts and circumstances of the case, relevant assessment order and the submissions made by the LAR. It is also noticed that similar issue arose in preceding assessment year 2008-09, where vide appeal order CIT(A)9/AC-5(2)/162/2010-11 dated 16/11/2011 the disallowance of excessive remunera tion paid to Directors was confirmed. Relevant para of the said order is reproduced hereunder: 6.1 I have carefully and dispassionately considered the facts and circumstances of the case. It is not disputed that the appellant's own auditor in Audit report submitted along with the appellant's return of income and in the prescribed Form No.3CB vide Note No.3 has reported that the appellant had paid excessive remuneration in excess of limits prescribed under the Company's Act amounting to ₹ 36,40,038/- for which the appellant made an application to the Central Government and the approval was awaited. Had the aforesaid excessive remuneration been considered as recovera ble, from the Directors, loans and advances would have been different than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limits prescribed under the Companies Act and also prohibited by law. The LAO's action of disallowance of excessive remuneration of ₹ 36,40,038/- is confirmed. Grounds of appeal No.7(1) to 7(7) are not allowed. 5.2. It is seen that neither the LAR has been able to point out any infirmity in the said appeal order of my Ld. predecessor, nor I find any reason to deviate from the reasoned finding of my predecessor. Having regard to the totality of facts and circumstances of the case, as the facts are identical to earlier year, I agree with my predecessor that the excess remuneration is not deductible expenditure, therefore, disallowance of ₹ 29,63,051/- worked out by the LAO vide para 4 and 5 of the relevant assessment order appears justified, hence the same is confirmed. Therefore, the aforesaid ground no.1 of appeal is dismissed. Aggrieved by the aforesaid order passed the learned CIT(A), the assessee is in further appeal before the Tribunal. 4. Before us, the learned Counsel for the assessee submitted that the issue of excess remuneration paid to the directors has been decided in favour of the assessee company by a co ordinate bench decision of the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e remuneration of ₹ 36.40 lakhs and added back to the total income of the assessee. 7. Aggrieved by the order of the AO the assessee preferred an appeal before the FAA. Before him, it was contended that the auditors had not considered schedule 13 of the Companies Act while working out the remuneration, that an application was made in Form NO.25A to the Central Government for approval of excess remuneration which was sanctioned vide letter dated 14.04.2010, that the excess remuneration paid to the Directors was an allowable expenditure. After considering the submissions of the assessee and the assessment order, the FAA held that assesse's own auditor had reported the payment of excess remuneration, that a copy of sanctioned letter granted by the Central Government for excessive remuneration paid was filed before him. The FAA called for a remand report from the AO with regard to the additional evidence submitted by the assessee in form of the sanction letter of the Central government. After considering the remand report, dated 11.02.11,the FAA held that the provisions of section 309(5A) and 309(5B) of the Companies Act were applicable to the case under considera ..... X X X X Extracts X X X X X X X X Extracts X X X X
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