Deputy Commissioner Of Income Tax, Circle- 1(1)(1), Bangalore V. Smt. Villoo Zareer Morawala Patel, Bangalore

ITA 1100/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7170 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 30-01-2020
• Assessment Year: 2011-2012
• Appeal Filed On: 17-05-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Salary income
• Section: 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V VASUDEVAN, VICE PRESIDNET AND SHRI B.R BASKARAN, ACCOUNTANT MEMBER ITA NO.1100/BANG/2019 ASSESSMENT YEAR : 2011-12 THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-1(1)(1), BENGALURU. VS. SMT. VILLOO ZAREER MORAWALA PATEL, C/O M/S AVESTHAGEN LTD., ROOM NO.215, 2 ND FLOOR, BMTC BUILDING, 80 FEET ROAD, 6 TH BLOCK KORAMANGALA, BENGALURU. PAN ABVPP 2706 J APPELL ANT RESPONDENT APPELLANT BY : SHRI PRAVEEN KARANTH, ADDL. CIT (DR) RESPONDENT BY : SMT. KAVITHA N MOORTHY, COM. SECRETARY DATE OF HEARING : 30.01.2020 DATE OF PRONOUNCEMENT : 04.02.2020 O R D E R PER B.R BASKARAN, ACCOUNTANT MEMBER THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 27-02-2019 PASSED BY THE LD CIT(A)-1, BENGALU RU AND IT RELATES TO ASST. YEAR 2011-12. 2. THE REVENUE IS AGGRIEVED BY THE DECISION OF LD C IT(A) IN HOLDING THAT THE SALARY INCOME IS ASSESSABLE AT RS. 2.10 CRORE ONLY AS AGAINST THE AMOUNT OF RS.4.38 CRORE ASSESSED BY THE AO. ITA NO.1100/BANG/2019 PAGE 2 OF 7 3. WE HEARD THE PARTIES AND PERUSED THE RECORD. TH E ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM SALARY AND OTHER SOURCES. SHE IS THE MANAGING DIRECTOR OF THE M/S AVESTHAGEN LTD AND THE SALARY INCOME WAS RECEIVED FROM THE ABOVE SAID COMPANY. S HE DECLARED SALARY INCOME OF RS.1,56,96,707/-. THE AO NOTICED FROM THE NOTES GIVEN IN SCHEDULE II TO NOTES OF ACCOUNTS ATTACHED IN THE ANNUAL REPORT THAT THE ABOVE SAID COMPANY HAS PAID REMUNER ATION IN EXCESS OF THE LIMIT PRESCRIBED UNDER SCHEDULE XIII OF THE COMPANIES ACT UP TO 31.3.2010 WITHOUT OBTAINING APPROVAL OF T HE CENTRAL GOVERNMENT. THE AMOUNT PAID UPTO 31.3.2010 WAS STA TED AS RS.4,38,98,113/-. IT WAS ALSO FURTHER MENTIONED THA T THE EXCESS AMOUNT HAS NOT BEEN APPROVED BY THE CENTRAL GOVERNM ENT. BASED ON THE ABOVE SAID NOTES ON ACCOUNTS, THE AO TOOK TH E VIEW THAT THE SALARY DUE TO THE ASSESSEE WAS RS.4,38,98,113/-. A CCORDINGLY HE ADDED THE DIFFERENCE AMOUNT OF RS.2,82,74,023/- IN THE HANDS OF THE ASSESSEE. 4. THE LD CIT(A) NOTICED THAT THE GROSS AMOUNT OF T HE SALARY RECEIVED BY THE ASSESSEE WAS RS.2,10,00,004/- AND N ET AMOUNT OF SALARY RECEIVED WAS RS.1,56,96,707/-. HE FURTHER N OTICED THAT THE GROSS AMOUNT OF SALARY OF RS.2,10,00,004/- IS MATCH ING WITH THE AMOUNT SHOWN IN FORM NO.26AS FIELD BY THE COMPANY. BEFORE THE LD CIT(A) THE ASSESSEE SUBMITTED THAT THE EXCESS RE MUNERATION THOUGH APPROVED TO BY THE COMPANY, YET THE SAME WAS NOT PAID TO HER AS NECESSARY APPROVAL FROM THE CENTRAL GOVT. WA S NOT AVAILABLE. IT WAS ALSO SUBMITTED THAT THE ASSESSEE, BEING INDI VIDUAL, IS FOLLOWING CASH METHOD OF ACCOUNTING FOR DECLARING S ALARY INCOME AND HENCE THE AO CAN TAX ONLY THE AMOUNT OF RS.2,10 ,00,004/- ON ITA NO.1100/BANG/2019 PAGE 3 OF 7 RECEIPT BASIS. THE LD CIT(A) WAS CONVINCED TO THE SUBMISSIONS OF THE ASSESSEE. ACCORDINGLY HE DIRECTED THE AO TO AD OPT THE SALARY INCOME OF THE ASSESSEE AT RS.2,10,00,004/-. THE RE VENUE IS AGGRIEVED BY THE DECISION RENDERED BY LD CIT(A). 5. WE HEARD THE PARTIES AND PERUSED THE RECORD. SE CTION 15 OF THE ACT GOVERNS THE TAXABILITY OF INCOME FROM SALAR Y AND THE SAME READ AS UNDER:- SECTION 15 OF INCOME TAX ACT 'SALARIES' THE FOLLOWING INCOME SHALL BE CHARGEABLE TO INCOME- TAX UNDER THE HEAD 'SALARIES'- (A) ANY SALARY DUE FROM AN EMPLOYER OR A FORMER EMPLOYER TO AN ASSESSEE IN THE PREVIOUS YEAR, WHETH ER PAID OR NOT; (B) ANY SALARY PAID OR ALLOWED TO HIM IN THE PREVIO US YEAR BY OR ON BEHALF OF AN EMPLOYER OR A FORMER EMPLOYER THOUGH NOT DUE OR BEFORE IT BECAME DUE TO HIM; (C) ANY ARREARS OF SALARY PAID OR ALLOWED TO HIM IN THE PREVIOUS YEAR BY OR ON BEHALF OF AN EMPLOYER OR A F ORMER EMPLOYER, IF NOT CHARGED TO INCOME-TAX FOR ANY EARL IER PREVIOUS YEAR. EXPLANATION 1.-FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT WHERE ANY SALARY PAID IN ADVANCE IS INCLUDED IN THE TOTAL INCOME OF ANY PERSON FOR ANY PREVIOUS YEAR IT SHALL NOT BE INCLUDED AGAIN IN THE TOTAL INCOME OF THE PERSON WHEN THE SALARY BECOMES DUE. EXPLANATION 2.-ANY SALARY, BONUS, COMMISSION OR REMUNERATION, BY WHATEVER NAME CALLED, DUE TO, OR RECEIVED BY, A PARTNER OF A FIRM FROM THE FIRM SHAL L NOT BE REGARDED AS 'SALARY' FOR THE PURPOSES OF THIS SE CTION. ITA NO.1100/BANG/2019 PAGE 4 OF 7 ON A PERUSAL OF CLAUSE (A) OF ABOVE SAID PROVISION, IT CAN BE NOTICED THAT ANY SALARY DUE FROM A EMPLOYER OR FORMER EMPLOYER TO AN ASSESSEE IS TAXABLE WHETHER THE SAME IS PAID OR NOT , MEANING THEREBY, THE SALARY INCOME IS ASSESSABLE ON ACCRUAL BASIS. CLAUSES (B) AND (C) CARVE OUT EXCEPTION TO CLAUSE (A). HEN CE THE CLAIM OF THE ASSESSEE THAT SALARY INCOME IS OFFERED TO TAX ON RE CEIPT BASIS IS NOT SUSTAINABLE. 6. HOWEVER, WHAT CAN BE TAXED IS WHAT IS DUE TO THE ASSESSEE. IT IS THE SUBMISSION OF THE ASSESSEE THAT THE COMPANY HAS SHOWN THE SALARY INCOME IN ITS BOOKS OF ACCOUNTS AT RS.2,10,0 0,004/- ONLY AND THE SAME WAS REFLECTED IN FORM NO.26AS FILED BY THE COMPANY. IT IS THE SUBMISSION OF THE ASSESSEE THAT THOUGH HIGHER A MOUNT OF SALARY WAS APPROVED BY THE COMPANY, YET THE SAME WAS NOT P AID TO THE ASSESSEE AS THE NECESSARY APPROVAL FROM CENTRAL GOV ERNMENT WAS NOT RECEIVED. THUS, ACCORDING TO THE ASSESSEE, WHA T HAS ACCRUED TO THE ASSESSEE WAS THE AMOUNT WHICH WAS PAID TO HER B Y THE COMPANY. IT WAS ALSO SUBMITTED THAT FORM NO.26AS A LSO MENTIONS THE AMOUNT OF RS.2,10,00,004/- ONLY. IT MEANS THA T THE COMPANY ITSELF SHOULD HAVE CLAIMED EXPENDITURE TOWARDS SALA RY PAID TO THE ASSESSEE AT RS.2,10,00,004/-. 7. SINCE THE ASSESSEE IS A MANAGING DIRECTOR OF THE COMPANY M/S AVESTHAGEN LTD., PAYMENT OF SALARY TO HER IS GOVERN ED BY THE PROVISION OF COMPANIES ACT. IT IS THE SUBMISSION OF THE ASSESSEE THAT THE HIGHER SALARY PROPOSED BY THE ABOVE SAID C OMPANY WAS NOT APPROVED BY THE CENTRAL GOVERNMENT. IT IS THE SUBM ISSION THAT ITA NO.1100/BANG/2019 PAGE 5 OF 7 ONLY A SUM OF RS.2,10,00,004/- WAS PAID AS SALARY D URING THE YEAR UNDER CONSIDERATION. 8. IT IS SUBMITTED THAT FORM NO.26AS MENTIONS TH E SALARY FIGURE AS RS.2,10,00,004/-. HENCE IT IS QUITE POSSIBLE TH AT THE COMPANY HAS CLAIMED THE SALARY EXPENDITURE PAID TO THE ASSE SSEE AT RS.2,10,00,004/- ONLY. THERE SHOULD NOT BE ANY DIS PUTE THAT THE SALARY IS PAYABLE AS PER THE CONTRACT REACHED BETWE EN THE COMPANY AND ASSESSEE. MERELY BECAUSE A HIGHER AMOUNT WAS P AID IN THE EARLIER YEARS DOES NOT LEAD TO THE PRESUMPTION THAT THE SAME AMOUNT SHOULD HAVE BEEN PAID IN THE SUCCEEDING YEAR ALSO. THERE IS A POSSIBILITY OF REDUCTION IN SALARY IN THE SUCC EEDING YEAR. WHAT IS PAID AS SALARY TO THE ASSESSEE WOULD HAVE BEEN C LAIMED AS EXPENDITURE BY THE COMPANY. ACCORDINGLY, IN OUR VI EW, IF THE COMPANY HAS CLAIMED SALARY OF RS.2,10,00,004/- ONLY AS DEDUCTION, THEN THERE IS NO REASON TO TAX ANY AMOUNT IN EXCESS OF THE ABOVE SAID FIGURE. HOWEVER THIS FACTUAL ASPECT REQUIRES VERIFICATION AT THE END OF THE AO. ACCORDINGLY FOR THE LIMITED PURPOSE S OF VERIFICATION OF THE ABOVE SAID ASPECT, WE RESTORE THIS TO THE FI LE OF THE AO. ACCORDINGLY THE ORDER PASSED BY THE LD CIT(A) WOULD STAND MODIFIED. THE ASSESSEE MAY BE PROVIDED WITH ADEQUATE OPPORTUN ITY OF BEING HEARD. ITA NO.1100/BANG/2019 PAGE 6 OF 7 9. IN THE RESULT, THE APPEAL FILED BY THE REVEN UE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY, 2020. SD/- (N.V VASUDEVAN) VICE PRESIDENT SD/- (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, 4 TH FEBRUARY, 2019. / VMS / COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE ITA NO.1100/BANG/2019 PAGE 7 OF 7 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. ..