TMI Blog2019 (4) TMI 290X X X X Extracts X X X X X X X X Extracts X X X X ..... because of the low salary/remuneration benevolently and magnanimously accepted by them in the earlier years. Professional and fair conduct in earlier years should have been appreciated and not frowned to be treated as a ground to disallow fair and genuine payment under Section 40A(2)(a) read with Clause (b) of the Act. A provision which requires a just and fair approach by the assessee must be interpreted and applied in a just and fair manner by the authorities. CIT(Appeals) had also pointed out that these three directors had earned income which was taxable at the maximum rate of tax. Therefore, this was not a case where an attempt was made to evade taxes. The salary/remuneration paid was taxed in the hands of the recipients at the highest slab. Expenditure incurred was income earned. Former was allowed as a deduction and the latter was taxed as taxable income. This is an added factor which should have been considered, but was ignored and not treated as relevant. - Decided in favour of assessee. - IT Appeal No. 120 of 2018 - - - Dated:- 12-12-2018 - MR SANJIV KHANNA AND MR ANUP JAIRAM BHAMBHANI, JJ. For The Appellant : Mr K.V.S. Gutpa and Harish Kumar Tyagi, Advocates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and nature of duties rendered by aforesaid persons. 8. When we peruse the salary of the companies having been paid to aforesaid three Directors in AY 2012-13, there is no increase in their salary as has been made during the year under assessment. Whereas when assessee company has paid salary to Shri Tilak Mukherji and Dr. U.V. Somayajulu to the tune of ₹ 14,32,391/-, ₹ 27,81,720/- ₹ 73,57,484 in FY 2008-09, 2009-10 2010-11 respectively and fees paid to Shri Arindam Ganguly to the tune of Rs.l,82,500/-, ₹ 4,05,000/- ₹ 13,76,000/- in FY 2008-09, 2009-10 2010-11 respectively which is an increase in the range of 250% to 300% without explaining that if there was a change in the nature of their work or they have put more time while rendering services to the assessee company or they have improved their qualification or expertise in one year. Because when Shri Tilak Mukherji and Dr. U.V. Somayajulu were getting salary of ₹ 27,81,720/- in FY 2009-10 suddenly their salary enhanced to ₹ 73,57,484 in FY 2010-11. 9. During the course of arguments, the ld. AR for the assessee contended that their salary was enhanced as the company has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k and examine the evidence and material and rationally decide disallowance, if any, which would be justified under Section 40A(2)(a) of the Act. 5. Delhi High Court in Hive Communication (P.) Ltd. v. CIT [2013] 353 ITR 200, has observed that any determination on the question of reasonableness and excessiveness requires several facets and parameters to be kept in mind, albeit the approach has to be from the standpoint of a reasonable and prudent businessman. The Assessing Officer's judgment of disallowance, if any, to be made has to be an objective and fair decision, as the provision is made to check evasion of tax and not to cause hardship in bona fide and genuine cases. Arms-length price paid for a fair market value should not be disallowed. The factors to be taken into consideration are those specified in Section 40A(2)(a); i.e. fair market value of the goods, services and facilities and whether they were for legitimate use of the business; and benefit derived or accruing to the assessee from the expenditure so incurred. Benefit accruing to the company or the assessee in the context of the section has to be viewed in a pragmatic way and not measured in terms of Pound, Shil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elopmental marketing and communication research, public opinion polling and retail audits in India, Bangladesh and Sri Lanka. He was a member of the Consultative Committee, Department of Adult Education, Indian Association for Study of Population, etc. He was co-author of many publications with Dr. U.V. Somayajulu and had personally conducted and supervised studies for UNICEF, World Bank, Future Group, the Urban Institute (USA) and some universities. Tilak Mukherji was also earlier working with M/s. TNS India Pvt. Ltd. and had drawn salary of ₹ 42,99,530/- per annum as per the TDS certificate. (v) Arindam Ganguly, an alumnus of St. Xavier's College, Calcutta was a strategy and marketing professional with multiple-industry experience in India as well as in the global market in consumer electronics, information and technology and telecom. He had been associated with several start-up brands and enterprises. 7. Appellant-assessee had explained the reason for low salary/remuneration accepted by the three directors in the earlier year which did not commensurate and was far less than the fair market value keeping in view their qualifications, experience, expertise and work ..... X X X X Extracts X X X X X X X X Extracts X X X X
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