TMI Blog2016 (3) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... ct is “in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income”. Therefore, merely because it was compulsory in law to engage the Company Secretary would not in any manner change this position. The fact of the matter is that the company did engage a Company Secretary and incurred expenditure of ₹ 2.91 lacs by way of salary. The act of engagement of Company Secretary was clearly for the purpose of carrying on activities of the company, in absence of which, the company would be breaching the legal requirement. That being the position, the expenditure had to be apportioned between the taxable income and the exempt income. - Decided against assessee - TAX APPEAL NO. 256 of 2006 - - - Dated:- 22-2-2016 - MR. AKIL KURESHI AND MR. Z.K.SAIYED, JJ. FOR THE APPELLANT : MRS SWATI SOPARKAR, ADVOCATE FOR THE OPPONENT : MRS MAUNA M BHATT, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. This appeal is filed by the assessee in which the following substantial question of law has been raised : Whether, in the facts and circumstances of the case the Income Tax Appellate Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limited extent of apportionment of the expenditure between taxable and exempt income, making following observations : I have considered the order of the A0 and the submission of the appellant. It is seen that the only salary paid by the appellant company was to the Company Secretary as he was only employee on the role and other expenses included audit fee, consultancy fee, etc as pointed out by the appellant. So far as the audit fee is concerned, I agree with the contention of the appellant that the same are required to be spent for the very existence of the company and hence audit fee can be considered as incurred for the purpose of business. However, salary paid to the employee i.e. Company Secretary, Consultancy fees, rates and taxes and other expenses had to be attributed in part for earning the exempted income. The exempted income i.e. Dividend income is not accruing to the appellant on its own and it requires the decision to be taken by the employee of the company making investments, to earn dividend income which may be exempted as well as to make advances to earn interest income. In any case, the appellant employee is required to arrange the financial matters in a prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the CIT 7. The assessee thereupon preferred this appeal in which the abovenoted question of law has been framed. 8. Learned counsel for the assessee contended that the Company Secretary was engaged by the assessee not for earning exempt income but since it was compulsory to do so under the Companies Act. Thus the salary paid to the Company Secretary was merely for the purpose of maintaining status of the company. He relied on the following decisions : 1) Commissioner of Incometax v. New Savan Sugar and Gur Refining company limited reported in 1990(185) ITR 564. 2) Commissioner of Incometax v. Ganga Properties Limited reported in 1993(199) ITR 94. 2) CIT, Mumbai v. Walfort Share Stock Brokers P Ltd reported in 2010 (326) ITR 1. 9. On the other hand, learned counsel Shri Bhatt for the Revenue opposed the appeal contending that admittedly virtually the entire income of the assessee was exempt under section 10 of the Act. The assessee had incurred expenditure by way of salary paid to the Company Secretary. Merely because it was compulsory to engage such a Company Secretary would not mean that such expenditure was not relatable to earning exempt income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny Secretary and incurred expenditure of ₹ 2.91 lacs by way of salary. 12. The act of engagement of Company Secretary was clearly for the purpose of carrying on activities of the company, in absence of which, the company would be breaching the legal requirement. That being the position, the expenditure had to be apportioned between the taxable income and the exempt income. 13. The issue can be looked from a slightly different angle. The claim of the expenditure of ₹ 2.91 lacs towards the taxable income of ₹ 39,900/would be incongruent with the assessee's stand that such expenditure was not for earning income but was by way of salary to engage an officer which was statutorily compulsory for the company to do. For whatever reason, once the company engaged a Company Secretary and the salary payable to the Company Secretary if it is claimed by way of expenditure for earning taxable income, we do not see how the company can argue that the same had no relation to operations of the company insofar as the activity of earning exempt income is concerned. The issue can also be looked from yet another angle. In a given case, if the assessee had only taxable income o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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