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M/s G.M. Apparel Pvt. Ltd. Versus Income Tax Officer – 8 (1) (4) , Mumbai

Disallowance of Salary to Director - Held that:- The Hon’ble Gujarat High Court in the case of CIT v. Prayashvin B. Patel, [1999 (10) TMI 60 - GUJARAT High Court ] as well as ACIT v. JNG Builders P. Ltd. [2013 (8) TMI 1016 - ITAT DELHI] have held that there are certain expenses such as audit fees, salaries, professional fee , insurance , printing and stationary, bank charges, house keeping charges , repairs and maintenance etc which are necessary to maintain the corporate entity and are allowabl .....

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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 RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : Shri Dharmesh Shah, Shri Vishwas S. Jadhav ORDER PER RAMIT KOCHAR, Accoun .....

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(Hereinafter called the Act ). 2. The grounds of appeal raised by the Assessee Company in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called the Tribunal ) read as under:- 1) On the facts and circumstances of the case, the learned CIT(A) legally erred in confirming the disallowance made by Assessing officer for a sum of Rs.l,38,000/- paid as Salary to Director. 2) On the facts and circumstances of the case, the learned CIT (A) legally erred in confirming .....

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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 .....

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O. observed that there was no business activity carried on by the assessee company during the year under consideration and majority of the expenditure was incurred on account of Directors Remuneration. The A.O. held that in the absence of any business activity by the assessee company, such expenditure against the interest income was not allowable. As per the A.O. the interest income has to be taxed under the residuary head of income from other sources u/s 56 of the Act, and therefore, the attrib .....

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50/- was allowed as deduction from interest income and balance amount of ₹ 2,58,011/- 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 w .....

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in the case of ACIT v. JNG Builders P. Ltd. to contend that there are certain expenses such as audit fees, salaries, professional fee , insurance , printing and stationary, bank charges, house keeping charges , repairs and maintenance etc which are necessary to maintain the corporate entity and are allowable expenses and it is also not necessary that every year the assessee company must have earned income from business or profession . The ld. CIT(A) after considering the submissions of the asses .....

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allowed in accordance to its efforts and contribution to the business carried out by the company but in the present case, there was no efforts were required for earning interest income from surplus fund invested in FDRs and the assessee company has not carried out any other business activity during the year under consideration. 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, .....

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for the assessee company submitted that the salary of ₹ 1,38,000/- was paid to the Directors. It was submitted that there was no business of trading and export of garments carried on by the assessee company. The A.O. has disallowed the entire expenses of ₹ 1,38,000/- incurred towards Director Remuneration. The ld. CIT(A) although allowed the statutory expenses amounting to ₹ 17,866/-, the disallowance of the entire Directors Remuneration of ₹ 1,38,000/- paid by the assess .....

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wable . There are no employees in the company and efforts were made to carry on the business of the company. It is submitted that in the past, interest income was assessed to tax as business income and only in this impugned assessment year the interest income has been charged under the head income from other sources . 8. The ld. D.R. submitted that the assessee company has earned interest income on the FDRs maintained with the Bank and the A.O. has rightly brought to tax the same under the head .....

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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 Mahindra Bank on which interest income has been earned during the relevant previous year. There is no business activity carried on by the assessee company during relevant previous year and .....

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