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TMI Blog2019 (4) TMI 1157X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: 1. The Ld. CIT(A) is not justified in confirming the disallowance of Rs. 28,36,642/- as alleged excess remuneration without proper basis. 2. The Ld. CIT(A) has not adduced any reason or evidence as to specific provision under the Act, such as 40A(2)(b) to justify the disallowance of remuneration paid to directors. 3. The Ld. CIT(A) is not justified in ignoring valid rebuttal given in the written submissions filed before him at the appellate proceedings. 4. In any event, the order of the CIT(A) is illegal, capricious and rendered without due regard to the facts and circumstances of the appellant's case and the law applicable thereto. 5. For these grounds and for such other grounds that may be adduced at the time of hearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that in respect of Shri Sanjay Kumar, excess remuneration of Rs. 22,73,334/- out of total remuneration of Rs. 24,00,000/- needs to be recovered and in respect of Ms. Geeta Mehra, remuneration of Rs. 41,86,872/- was approved. Therefore, the AO came to a finding that Ms. Geeta Mehra got excess remuneration of Rs. 6,13,128/- not approved by the Central Government. Accordingly, the AO asked the assessee to explain as to why the sum of Rs. 28,86,462/- (Rs.22,73,334/- + Rs. 6,13,128/-), which is in excess of remuneration paid to the Directors should not be disallowed. The AO noted that the assessee failed to furnish any plausible explanation on the above. As the remuneration was in excess of the limits set by the Companies Act and that the Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xi) Copy of circular no. 6 P dated 06/07/1968. The Ld. counsel further submits that a perusal of the assessment records and correspondences would reveal that no explanation was sought for in writing for treating the alleged excess as not allowable expenses under the Act. The remuneration paid or payable as the case may be, is justified on commercial expediency and based on valid resolution approved by the shareholders of the company it its EGM held on 07.04.2011 approving the payment of Rs. 4.90 lakhs per month to each of the Directors Ms. Geetha Mehra and V. Sanjay Kumar. It is stated that after the closure of books and audit of accounts for the year ended 31.03.2011 (AY 2011-12), being the impugned year, the auditors noticed that the rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 80.25 lakhs for this assessment year. Thus factually there is no mention in either the alleged audit report or the alleged notes to accounts indicating anywhere that a sum involved is at Rs. 28,86,462/-. The Ld. counsel submits that the AO has used his deductive logic to work out the alleged sum of Rs. 28,86,462/-, de hors the audit report and the notes to accounts by taking into account extraneous material not forming part of the audit report and the alleged noted to accounts. The Ld. counsel further submits that the CIT(A) has not taken cognizance of written submissions dated 29.09.2015 filed on 15.10.2015 giving the entire picture on the disallowance made, enclosing therein copies of the executive orders sanctioning remuneration by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e audited accounts and hence post-facto sanction of the excess remuneration was made by proper application to the Central Government u/s 309(5B) of the Companies Act. Thus the Ld. counsel submits that the disallowance made is neither in contravention of section 40A(2)(b) r.w. CBDT Circular dated 06.07.1968 nor in terms of section 37(1), since business expediency mandates payment of reasonable remuneration to Directors, commensurate with their age and experience in the relevant field of business. 6. On the other hand, the Ld. DR submits that it is a case where excess amount is paid in contravention the Companies Act and duly mentioned by the auditors as per their report annexed to the balance sheet. Thus the Ld. DR supports the order passe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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