PRM SECURITIES P. LTD, MUMBAI V. ITO 4(2)(1), MUMBAI

ITA 1676/MUM/2011

• Counselvise Citation: 167619914 RSA 2011
• Duration Of Justice: 3 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 28-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A RAMCHANDRAN
• Assessee Lawyers: NISHIT GANDHI
• Keywords: Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI . . , , / ! . . '# . . $ , % BEFORE SHRI R. C. SHARMA, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER /. ITA NO. 1676/MUM/2011 $ $ $ $ & & & & / ASSESSMENT YEAR: 2007-08 PRM SECURITIES PVT. LTD. 4, KHANDEKAR WADI, DADI SETH AGIARY LANE, KALBADEVI, MUMBAI-400 002 $ $ $ $ / VS. ITO-4(2)(1) AAYAKAR BHAVAN, M.K. ROAD. MUMBAI.-400 020 ( '( / APPELLANT) ( )*'( / RESPONDENT) PERMANENT ACCOUNT NO. :- AAACP 6140 P $+, - / ASSESSEE BY : SHRI NISHIT GANDHI . / - / REVENUE BY : SHRI A. RAMCHANDRAN / O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL IS FILED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER OF THE LD.CIT(A) -11, MUMBAI DATED 06.12.2010 FOR THE ASSE SSMENT YEAR 2007-08. 2. AT THE OUTSET, IT IS OBSERVED THAT THE PRESENT A PPEAL FILED BY THE ASSESSEE IS TIME BARRED BY 7 DAYS AND IN THIS CONNECTION THE AS SESSEE HAS FILED CONDONATION APPLICATION ALONG WITH THE AFFIDAVIT SWORN BY THE D IRECTOR OF THE ASSESSEES COMPANY EXPLAINING THE REASONS FOR THE DELAY IN FILING THE APPEAL. IN THE AFFIDAVIT, IT IS AVERRED THAT HE HAS LEFT ON 13.02.2011 FOR HIS NATIVE PLACE IN GUJARAT TO ATTEND A RELIGIOUS FUNCTION AND ORIGINALLY SUPPOSED TO RETURN BACK ON 16.02.2011. HOWEVER, DUE TO NON $ / ,# / DATE OF HEARING : 03.03.2014 01& / ,# / DATE OF PRONOUNCEMENT : 07.03.2014 ITA NO. 1676/MUM/2011 PRM SECURITIES PVT. LTD. ASSESSMENT YEAR: 2007-08 2 CONFIRMATION OF THE RAILWAY TICKET, HE COULD RETURN ONLY ON 24.02.2011 AND THEREFORE THE APPEAL IS DELAYED BY 7 DAYS, THE LAST DAY FOR F ILING THE SAME BEING 21.02.2011. TO SUPPORT THE SAID CLAIM, COPIES OF THE RAILWAY TI CKETS ARE ALSO ENCLOSED WITH THE CONDONATION APPLICATION. CONSIDERING THAT THE ASSES SEE HAS BEEN PREVENTED BY SUFFICIENT CAUSE FOR NOT FILING THE APPEAL IN TIME, WE CONDONE THE SAID DELAY AND PROCEED TO DECIDE THE APPEAL. 3. IN GROUND NO. 1, THE ASSESSEE HAS AGITATED THE D ECISION OF THE LD.CIT(A) IN CONFIRMING THE DISALLOWANCE RS.9,10,000/- MADE BY T HE AO ON ACCOUNT OF THE REMUNERATION PAID TO THE DIRECTORS BY TREATING THE SAME AS UNREASONABLE AND EXCESSIVE WITHIN THE MEANING OF SECTION 40A (2)(B) OF THE INCOME-TAX ACT. 3.1 HAVING HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD, IT HAS BEEN BROUGHT TO OUR NOTICE THAT IN THE ASSESSEES OWN CA SE FOR THE YEAR 2006-07 IN ITA NO. 3326/MUM/2010, THE TRIBUNAL HAS DELETED A SIMIL AR DISALLOWANCE/ADDITION AND THE RELEVANT FINDINGS FOR THE TRIBUNAL IS EXTRACTED HEREUNDER:- WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATER IAL ON RECORD. FIRSTLY, IT IS PERTINENT TO MENTION THAT THE AUTHORITIES BELOW HAVE NOT DOUBTED THE GENUINESS OF THE PAYMENTS MADE TO THE DIRECTORS. SECONDLY, U/S 40A (2), NO DOUBT IF THE AO IS OF THE OPINION THAT THE PAYMENT OF THIS KIND IS EXCESSIVE OR UNREASONABLE CAN MAKE THE DISALLOWANCE OF SUCH CLAI M FOR DEDUCTION. HOWEVER, SUCH OPINION OF THE AO IS TO BE FOUND ON R ATIONAL BASIS TO ESTABLISH THAT THE EXPENDITURE IS EXCESSIVE OR UNREASONABLE. THIRDLY, IN THIS CONTEXT, IT IS RELEVANT TO STATE THAT THE TRIBUNAL IN THE CASE OF S.K. ENGINEERING VS. JCIT (2006) 103 ITD 97 HAS HELD THAT WHILE INVOKING SECT ION 40A(2), THE ONUS LIES UPON THE AO TO PROVE THAT THE PAYMENT IS EXCESSIVE OR UNREASONABLE WITH RESPECT TO THE FMV OF THE BOOKS/SERVICES. THERE IS NO PRESUMPTION THAT WHATEVER HAS BEEN PAID IN THE EARLIER YEAR ONLY BEC OMES REASONABLE AND ANYTHING IN EXCESS BECOMES UNREASONABLE. APPLYING T HIS RATIO TO THE FACT OF PRESENT ASSESSEE, THE SAID ONUS ON THE PART OF THE AO TO PROVE THAT THE PAYMENT MADE TO THE DIRECTORS IS EXCESSIVE OR UNREA SONABLE HAS NOT BEEN DULY DISCHARGED WHEREAS THE AO HAS SIMPLY COMPARED THE PAYMENT MADE BY THE COMPANY TO THE DIRECTOR IN THE EARLIER YEARS FO R ARRIVING AT CONCLUSION THAT THE SAID PAYMENT IS EXCESSIVE AND UNREASONABLE. CON SIDERING THE FACTS AND THE POSITION OF LAW IN TOTO, THE LD.CIT(A), IN OUR VIEW IS NOT JUSTIFIED IN CONFIRMING THE SAID DISALLOWANCE/ADDITION MADE BY T HE AO ON THIS COUNT. THEREFORE, THE IMPUGNED ADDITION/DISALLOWANCE IS DE LETED. SINCE DURING THE YEAR UNDER CONSIDERATION ALSO THE DISALLOWANCE/ADDITION ON ACCOUNT OF EXCESS REMUNERATION PAID TO THE DIRECTORS HAS BE EN CONFIRMED BY THE LD.CIT(A) ON SIMILAR GROUNDS AS THAT IN THE CASE OF AY 2006-0 7, FOLLOWING THE AFOREMENTIONED ITA NO. 1676/MUM/2011 PRM SECURITIES PVT. LTD. ASSESSMENT YEAR: 2007-08 3 DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE YEAR 2006-07, WE DELETE THE IMPUGNED DISALLOWANCE/ADDITION. RESULTANTLY, GR OUND NO 1 IS ALLOWED. 4. GROUND NO. 2 IS NOT PRESSED BY THE ASSESSEE AND HENCE THE SAME REQUIRES NO ADJUDICATION. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 07 TH DAY OF MARCH, 2014. SD/- SD/- ( . . / R.C.SHARMA) ( ! . . '# . . $ / DR. S.T.M. PAVALAN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER /MUMBAI, 3$ /DATED: 07.03.2014. $ . /P.S. *SRIVASTAVA COPY TO: '( / THE APPELLANT )*'( / THE RESPONDENT 4 5 / THE CIT, CONCERNED, MUMBAI 4 5 / THE CIT(A) CONCERNED, MUMBAI 678 ),$ /THE DR C BENCH 8 9 / GUARD FILE. *6, ), //TRUE COPY// $ / BY ORDER : / ;. DY/ASSTT. REGISTRAR, , / ITAT, MUMBAI.