TMI Blog2016 (9) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be required to spend the amount for carrying on its activities . The assessee company incurred expenses of ₹ 17,866/- towards legal expenses, audit fees, bank charges and miscellaneous expenses which had been allowed by the ld. CIT(A). However as per the facts emerging from the records, there were no efforts or contributions made by the Directors to carry on the business of the company as in-fact no business was carried on by the assessee company during the entire previous year, hence in our considered view , the remuneration of ₹ 1,38,000/- paid to Directors was rightly disallowed by the A.O. and confirmed by the ld. CIT(A) - I .T.A. No. 1176/Mum/2016 - - - Dated:- 28-7-2016 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come. From the accounts of the assessee company, it was observed by the AO that the assessee company was in receipt of interest income of ₹ 2,58,861/- in respect of fixed deposit maintained with M/s Kotak Mahindra Bank Ltd. The assessee company had treated the same as interest income and computed the profit from the business at ₹ 1,02,995/- after claiming expenditure of ₹ 1,55,866/- in the return of income filed with the Revenue. The A.O. asked the assessee company to explain as to why the interest income be not brought to tax under the residuary head of Income from other sources and the expenditure claimed against the interest income is not allowable under the provisions of the Act . The assessee company submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 011/- was added to the total income of the assessee company under the head income from other sources vide assessment order dated 25-08-2014 passed by the AO u/s 143(3) of the Act. 4. Aggrieved by the assessment order dated 25-08-2014 passed by the A.O. u/s. 143(3) of the Act , the assessee company filed its first appeal before the ld. CIT(A). 5. Before the ld. CIT(A), the assessee company submitted that there was a slow down or lull in the business but the assessee company had not stopped the carrying on of its business. The expenditure claimed was bare minimum and to keep the company afloat, these expenses were very much required. In support, the assessee company placed reliance on the decision of the Hon ble Gujarat High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. Hence, the A.O. s action was upheld by the learned CIT(A) whereby disallowance of Directors Remuneration of ₹ 1,38,000/- was upheld by the learned CIT(A). However, in view of the decision of the Hon ble Gujarat High Court in the case of CIT v. Prayashvin B. Patel, 240 ITR 931, statutory expenses like audit fees, bank charges, professional charges, insurance etc. totaling to the amount of ₹ 17,866/- was allowed by the learned CIT(A) vide appellate orders dated 11.01.2016. 6. Aggrieved by the appellate orders dated 11.01.2016 passed by the ld. CIT(A), the assessee company is in second appeal before the Tribunal. 7. Before the Tribunal, the ld. Counsel for the assessee company submitted that the salary of ₹ 1,38,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company has not carried on any business activity during the relevant previous year and hence Directors Remuneration was rightly disallowed by AO and the disallowance sustained by learned CIT(A). The ld. DR relied on the orders of the authorities below. 9. We have considered the submissions of both the parties and also perused the material available on record including the case laws relied upon. We have observed that the assessee is a private limited company which has claimed to be in the business of trading and export of readymade garments. No business activity has been carried on by the assessee company during the relevant previous year. We have observed that the assessee company has only placed the surplus funds in FDRs with the Kotak ..... X X X X Extracts X X X X X X X X Extracts X X X X
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