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M/s IMA PG India Pvt. Ltd. (Formerely known as Precision Gears Ltd.) Versus ACIT Range 5 (2) , Mumbai

2015 (7) TMI 907 - ITAT MUMBAI

Disallowance for excess remuneration paid to the Directors - A.O. made the disallowance simply relying on the erroneous Remark in Auditors' Report - Held that:- The assessee had made excessive payment of remuneration to the Director. but same was approved by the central government, as required by the Companies Act.1n these circumstances, we are of the opinion that there was no contravention of the provisions of the Act - Decided in favour of assessee.

Disallowance ul/s.40(a)(ia) - non .....

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ly a penal provision as when the tax deducted at source is deposited, the amount on which deduction was made is allowed as an expenditure incurred in the previous year in which the payment of tax deducted at source is made. Thus, it results in shifting of the year in which the expenditure can be claimed, even if payment has been made to the recipient and is to be allowed as expenditure in another year. The principle of matching, i.e., matching of receipts with expenditure to the extent indicated .....

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namended section refers to time specified in Section 139(1) of the Act. The amended section 40(a)(ia) expands and further liberalises the statue when it stipulates that deductions made in the first eleven months of the previous year but paid before the due date of filing of the return, will constitute sufficient compliance. The matter needs further verification. Therefore, in the interest of justice, we are remitting the matter to the file of the AO for fresh adjudication - Decided in favour of .....

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tion of ₹ 66,77,919 paid to the Directors. (2) The C.I. T. (A) erred in not appreciating that the A.O. made the disallowance simply relying on the erroneous Remark in Auditors' Report, without verifying the facts. (3) The C.I.T. (A) has not appreciated the Auditor's remark in correct perspective, which clearly mentions in the report that application for sanction of additional remuneration has been made to the Central Govt. and sanction is awaited. (4) The C.I.T.(A) has overlooked t .....

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77; 18,72,166: (1) The C.I.T. (A) erred in law and in fact as well as confirming disallowance of ₹ 18,72,166 u/s. 40(a)(ia) of I. Tax Act, 1961. (2) The C.I.T. (A) erred in not appreciating that the A.O. made the disallowance simply by relying on the erroneous Remark in Auditor's Report, without verifying the facts. (3) The C.I.T. (A) erred in not accepting additional evidences submitted by the Appellant in respect of the said disallowance. (4) The C.I.T.(A) erred in not appreciating t .....

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e ought to have been accepted by him. (6) The C.I.T. (A) erred in simply relying on the Remand Report without looking in the case records of the AO to verify whether the evidences submitted as additional evidences were in fact not in the assessment records. (7) The C.I.T. (A) erred in not appreciating that the appellant deducted TDS before the year end from the provision made for relevant expenses and paid the TDS in various installment before due date for filing the Return of Income i.e. 30th S .....

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total income of ₹ 8,95,21,216/-.The AO completed the assessment u/s.143(3) of the Act on 29.12. 2011, determining the income of the assessee at ₹ 9,90,74,910/-. 2.First ground of appeal is about excess remuneration paid to the Director. We find that the identical issue had arisen in the earlier AY. also. While deciding the appeal for that year(ITA/ 378/Mum/2012-dt. 13.03.2015,we have decided the issue as under: "6.Next ground of appeal is about excess remuneration, amounting to .....

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ere was no dispute about the total remuneration debited and the remarks made by the auditors, that the assessee had failed to prove that working given by the auditors was incorrect. Invoking the provisions of explanation to 37(1) of the Act, the AO disallowed the excessive 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 no .....

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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 consideration that the assessee was not entitled t .....

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yment. He referred to the page no.38 of the paper book. He also relied upon the order of the Tribunal delivered for the year 2001-02 to 2004-05 wherein alleged excessive remuneration to the Directors disallowed u/s. 40A (2) (b)of the was deleted. DR supported the order of the FAA. 9. We have heard the rival submissions and perused the material before us. We find that the assessee had made excessive payment of remuneration to the Director. but same was approved by the central government, as requi .....

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the order for that year,we are deciding ground no.1 in favour of the assessee. 4. Next ground of appeal deals with disallowance of ₹ 18.72 lakhs uls.40(a)(ia)of the Act. During the assessment proceedings, the AO found that TDS had not been deducted on ₹ 18.72 lakhs, that the said amount was not added in computation of income. He issued a show cause notice to the assessee in that regard. ln its reply, the assessee stated that TDS payment of ₹ 18.72 lakhs had been made before Sep .....

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09-1 0 and 201O-11.Before the F AA,the assessee filed additional evidences. He called for Remand Report(RR)from the AO.After considering the material available, he held that amended provisions of the section were applicable w.e.f. 01.04. 2010,that there were many a discrepancies in TDS reconciliations, that the assessee had not deducted the prescribed tax which was deductible at source under chapter XVIIB of the Act. The additional evidences were not admitted by the F AA. Finally, he upheld the .....

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A. 7. We have heard the rival submissions and perused the material before us. We find that the assessee had filed additional evidences, that same were not admitted by the F AA, that the assessee had filed composite certificate of deducting taxes. It is found that Hon'ble Delhi High Court has in the matter of Naresh Kumar(supra) has held that the proviso was applicable with retrospective effect. Following is the decision of the Hon'ble Court: Provisions relating to deduction of tax at sou .....

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ncurred in the previous year in which the payment of tax deducted at source is made. Thus, it results in shifting of the year in which the expenditure can be claimed, even if payment has been made to the recipient and is to be allowed as expenditure in another year. The principle of matching, i.e., matching of receipts with expenditure to the extent indicated in section 40(a)(ia), therefore, gets affected. The provision can work harshly and may be very stringent in some cases. The legislative pu .....

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