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2016 (6) TMI 596

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..... of the company on such disputed remuneration amount was exactly the same as the tax the four Directors had paid to the Revenue. To these factual aspects, even the Revenue has, at no stage raised any dispute. We may therefore, proceed on the basis that the element of excessive remuneration represents that income of the company which was eventually taxed in the hands of the Directors at the same rate at which; had it not been so distributed; would have been taxed in the hands of the company. In that view of the matter, the question of revenue neutrality would immediately arise. A certain income has already been taxed in the hands of the Directors. Permitting the Revenue to tax the same income again at the same rate in the hands of the princip .....

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..... ot for the purpose of the business of the company. Regarding second contention, the Assessing Officer noted that the Directors had also paid tax at the rate of 30% but observed that the same would not justify unreasonably huge rise in remuneration. 3. The assessee carried the matter in appeal. CIT(Appeals) disposed of appeal by order dated 26.2.2013 in which he dismissed the assessee's ground regarding disallowance under Section 40A(2) of the Act. Regarding revenue neutrality; before the Appellate Commissioner the assessee had placed the further details in which it was pointed out that the against the disallowance of ₹ 71,30,178/-, the company would have paid tax of ₹ 21,39,053/-, whereas all four Directors in question ha .....

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..... ibunal was right in law and in overlooking the fact that the entire exercise was revenue neutral in nature because the company as well as the Directors were taxable at the same rate and that the Directors had paid off the taxes and taking into consideration it ought not to have confirmed any part of the disallowance made by the authorities ? 6. We have heard learned counsel for the parties. The question of applicability of Section40A(2) of the Act to the restricted disallowance of ₹ 47,90,178/- is already concluded by this Court by the said order dated 31.3.2015. We may therefore, proceed on that basis. Despite this, the question that still survives is whether the Revenue can tax the same income in the hands of the company on whic .....

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