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Mantri Properties Pvt. Ltd. Versus ITO, Ward-11 (1) , Pune

2016 (6) TMI 801 - ITAT PUNE

Disallowance of remuneration to Directors - AO disallowed 50% of the payment of salary to the Directors as being not wholly and exclusively for business purposes - Held that:- As submitted by the assessee that in the subsequent year the assessee company has started getting revenue receipts and the personnel cost has also gone up to ₹ 15.23 lakhs as against ₹ 12.01 lakhs during the year. The directors have been paid salary of ₹ 9,00,000/- each in A.Yrs. 2008-09 and 2009-10 and n .....

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s been made. In our opinion, once a Director is in employment his salary should not be reduced in a particular year because there is no generation of revenue. The logic given by the revenue authorities in the instant case in our opinion is not justified. We therefore set aside the order of the CIT(A) and direct the AO to delete the disallowance out of remuneration to Directors. - Disallowance of rent for residence of the Director - Held that:- It is an admitted fact that no such rent was pa .....

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disallowing the rent expenses of ₹ 3 lakhs. - Disallowance of travelling, postage and telephone expenses - Held that:- We find the assessee has travelled to Bangkok, Malaysia and Kaulalumpur which are mainly tourist spots. Nothing has been produced before us that the assessee has gone to these places in relation to his business activity and which has resulted into some business. No such proof was also filed that he had discussed with some people/business houses there on account of mini .....

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stified. The addition, if any, can be made in the hands of the Directors as perquisite. - Disallowance of Electricity expenses - Held that:- As we find the same has rightly been disallowed by the AO and upheld by the CIT(A) since the same relates to the bills of Radhika Bungalow where the parents of the assessee are residing and bills of the residence of one of the Directors Shri Sandip Mantri. - Appeal decided partly in favour of assessee - ITA No. 1124/PN/2014 - Dated:- 20-5-2016 - Ms. .....

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long term capital gain of the current year. From the profit and loss account filed by the assessee the AO noted that the only income disclosed by the assessee is from sale of land at Bhugaon which has been offered as long term capital gain. No other income has been shown and neither there is any opening or closing work in progress. However, the assessee has claimed various expenses such as Salaries of personnel including site development expenses, other expenses and depreciation as per Schedule .....

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t years and the company also provided project construction related services to the construction industry. Although the assessee has not received any revenue during this year, however, it does not mean that assessee company does not have any business set up or has ceased to do business activity. On the contrary the company as a going concern is in existence and owns reasonable infrastructure, assets and has employed labour force and is ready/in a position to execute contracts/render services. It .....

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,33,088 It was submitted that the above expenses are incurred wholly and exclusively for the purpose of business. 4. However, the AO was not satisfied with the explanation given by the assessee. He held that the personnel cost of ₹ 12,01,641 includes salary of ₹ 8.27 lakhs to the Directors. Further, the salary paid to 7 persons out of which 2 are Receptionists, 3 are Accountants, 1 is Architect and 1 Estate Manager. Therefore, the expenditure claimed on account of personnel is agains .....

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ince the rent has been paid to the wife of the Director who is specified person u/s.40A(2)(b), the AO disallowed an amount of ₹ 3 lakhs being rent paid for the residence of the directors ₹ 2,43,000/- and rent paid for Furniture ₹ 57,000/-. 5. So far as sales promotion and other expenses are concerned he noted that in absence of any work in progress or finished goods available with the assessee to sell, such expenditure appears to be unreasonable. Further, bills to the extent of .....

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as been shown for venturing into a new business of mining was rejected by the AO. He accordingly disallowed an amount of ₹ 2,27,426/- being 50% out of the expenses of ₹ 4,54,852/-. The AO similarly disallowed an amount of ₹ 1,17,453/- being 50% of depreciation on cars for probable personal use. The AO disallowed ₹ 35,419/- out of Electricity charges of ₹ 63,389/- which related to the Bungalow where the parents of the assessee are residing and the residence of one of .....

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e facts & circumstances of the case, the Ld.CIT(A)-I, Pune erred in confirming the disallowance of the following expenses : Remuneration to Directors - ₹ 4,13,500/- Rent Expenses - ₹ 3,00,000/- Sales Promotion Expenses - ₹ 29,905/- Travelling, Postage and Telephone Exp. - ₹ 1,63,978/- Depreciation - ₹ 1,17,453/- Electricity Expenses - ₹ 35,419/- Job Work Charges - ₹ 93,224/- 2. The assessee craves leave to add, amend or alter the grounds of appeal. T .....

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T(A) cannot sit in judgement regarding the commercial expediency or reasonableness of the various items of expenses incurred by the assessee. 10. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). 11. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. So far as the disallowance of remun .....

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o activity relating to construction business was carried out by the assessee. He therefore upheld disallowance of 50% of the remuneration to Directors. It is the submission of the Ld. Counsel for the assessee that in the subsequent year the assessee company has started getting revenue receipts and the personnel cost has also gone up to ₹ 15.23 lakhs as against ₹ 12.01 lakhs during the year. The directors have been paid salary of ₹ 9,00,000/- each in A.Yrs. 2008-09 and 2009-10 a .....

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e has been made. In our opinion, once a Director is in employment his salary should not be reduced in a particular year because there is no generation of revenue. The logic given by the revenue authorities in the instant case in our opinion is not justified. We therefore set aside the order of the CIT(A) and direct the AO to delete the disallowance of ₹ 4,13,500/- out of remuneration to Directors. 12. So far as the payment of rent is concerned, it is an admitted fact that no such rent was .....

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