TMI Blog2018 (5) TMI 1162X X X X Extracts X X X X X X X X Extracts X X X X ..... ng when the expenditure incurred by the assessee would be excessive or unreasonable. The decision is left to the Assessing Officer. The decision is a subjective decision having regard to the facts of the case. No substantial question of law involved in these appeals. - T.C.A.Nos.129 to 131 of 2018 and C.M.P.Nos.1743 and 1744 of 2018 - - - Dated:- 10-4-2018 - Ms. Indira Banerjee, CJ And Abdul Quddhose, JJ. For the Appellant : Mr.Karthik Ranganathan Stng. Counsel, assisted by Mr.Vijay Kumar Punna JUDGMENT ( Delivered by Ms. Indira Banerjee, Chief Justice ) These appeals filed by the Revenue are against a common judgment and order dated 21.09.2016 passed by the Income Tax Appellate Tribunal, 'A' Bench, Chennai, in the appeals of the Revenue being I.T.A.Nos.126/Mds/2012 pertaining to the assessment year 2010-11, I.T.A.Nos. 125/Mds/2012 relating to the assessment year 2011-12 and I.T.A.No. 130/Mds/2012 relating to the assessment year 2012-13. 2.The short question in these appeals is whether the Tribunal erred in law in deleting the disallowance of the claim of the assessee M/s.Madras Engineering Industries Private Limited to deduction from the income of pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the assessee is an individual any relative of the assessee (ii) where the assessee is a company, firm, association of persons or Hindu un-divided family any director of the company, partner of the firm, or member of the association or family, or any relative of such director, partner or member; (iii) any individual who has a substantial interest in the business or profession of the assessee, or any relative of such individual; ......... 5.Under Section 40A of the said Act and in particular, 40A(2)(a) and 40A(2)(b)(i), (ii) and (iii), where an individual assessee incurs expenditure on payment of commission or any other payment to any relative of the assessee, or an assessee which is a company incurs expenditure on payment to any Director, Partner, Member of association or family or any relative of such Director, Partner or Member, and the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate means of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC) and by the High Courts of Allahabad and Gauhati in the case of Kashiprasad Carpets (P) Ltd. vs. CIT (148 ITR 0710) and Pheros Co. P. Ltd. vs. CIT, (175 ITR 0044), respectively. 9.The Appellate Commissioner further found that the Assessing Officer could not have decided what the assessee should do and pay. Disallowance could be made under Section 40A(2) only when warranted and when the conditions of the said section were satisfied. 10. The Commissioner of Income-tax (Appeals) also took note of the fact that Mr.Parthasarathy was assessed to tax in the highest tax bracket and therefore, there was no loss of revenue with regard to the expenditure incurred on account of profit commission paid by the respondent assessee. The Commissioner of Income-tax (Appeals) accordingly held that the case of the assessee did not call for disallowance of profit commission. He held that the profit commission incurred by the assessee was reasonable keeping in view the legitimate needs and benefit derived by the assessee due to the services rendered by Mr.E.K.Parthasarathy. 11.Being aggrieved, the Revenue filed appeals before the Income Tax Appellate Tribunal, 'A' Bench, Chennai, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court agreed with and approved a Full Bench Judgment of this Court in Rimmalapudi Subba Rao vs Noony Veeraju And Ors, reported in AIR 1951 Mad 969 and laid down the principles for deciding when a question of law becomes a substantial question of law. 15.The Supreme Court held: When a question of law is fairly arguable, where there is room for difference of opinion on it or where the Court thought it necessary to deal with that question at some length and discuss alternative views, then the question would be a substantial question of law. On the other hand if the question was practically covered by the decision of the highest court or if the general principles to be applied in determining the question are well settled and the only question was of applying those principles to the particular fact of the case it would not be a substantial question of law. 16.In Sir Chunilal V. Mehta Sons Limited, supra, the Supreme Court laid down the following test as proper test, for determining whether a question of law raised in the case is substantial: The proper test for determining whether a question of law raised in the case is substantial would, in our opinion, be whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of law , means of having substance, essential, real, of sound worth, important or considerable. It is to be understood as something in contradistinction with technical, of no substance or consequence, or academic merely. However, it is clear that the legislature has chosen not to qualify the scope of substantial question of law by suffixing the words of general importance as has been done in many other provisions such as Section 109 of the Code or Article 133(1)(a) of the Constitution. The substantial question of law on which a second appeal shall be heard need not necessarily be a substantial question of law of general importance. 20. In Guran Ditta v. Ram Ditta, reported in AIR 1928 PC 172 the phrase substantial question of law as it was employed in the last clause of the then existing Section 100 CPC (since omitted by the Amendment Act, 1973) came up for consideration and their Lordships held that it did not mean a substantial question of general importance but a substantial question of law which was involved in the case. 21.The principles relating to Second Appeals under Section 100 CPC as summarised in Hero Vinoth v. Seshammal, supra, are: (i) An inference of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited right of appeal only in a case which involves substantial questions of law, it is not open for this Court to sit in appeal over the factual findings arrived at by the Appellate Tribunal. 24.In the instant case, Section 40A(2)(a) provides that if the officer is of opinion that expenditure to inter alia a Director of a company was excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment was made or the legitimate needs of the business, occupation of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as was considered by him to be excessive or unreasonable would not be allowed as a deduction. There is no yardstick or guideline for judging when the expenditure incurred by the assessee would be excessive or unreasonable. The decision is left to the Assessing Officer. The decision is a subjective decision having regard to the facts of the case. We find that there is no question of law far less any substantial question of law involved in these appeals. 25.The appeals are, accordingly, not entertained and the same are dismissed. No costs. Consequently, C.M.P.Nos.1743 a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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