Besto Electronics P.Ltd, New Delhi V. ACIT, Circle-4(2), New Delhi

ITA 254/DEL/2020

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7054 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 13-01-2020
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Fair market value; Onus to prove; TDS; Set aside
• Section: 271(1)(c); 192; 13; 37; 263

Judgement Text

FIT FOR PUBLICATION SD/- SD/- (SS) JM (ANM) (AM) IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: A: NEW DELHI) (THROUGH VIDEO CONFERENCING) BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMB ER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA NO:- 254/DEL/2020 ( ASSESSMENT YEAR: 2013-14) BESTO ELECTRONICS PVT. LTD, NEW DELHI. VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE 4(2), NEW DELHI. APPELLANT RESPONDENT PAN NO: AAACB1459K ASSESSEE BY : SHRI B.K. ANAND, CA REVENUE BY : SMT. ALKA GAUTAM, SR. DR PER ANADEE NATH MISSHRA, AM (A) THIS APPEAL BY ASSESSEE IS FILED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, NEW DELHI, [LD. CIT(A), F OR SHORT], DATED 13.11.2019 FOR ASSESSMENT YEAR 2013-14. GROUNDS TAKEN IN THIS APP EAL OF ASSESSEE ARE AS UNDER: 1. THAT THE AUTHORITIES BELOW ERRED IN DISALLOWING RS. 1,00,66,740 OUT OF TOTAL INTEREST PAID WITH COMPLETE DISREGARD TO THE FACT THAT THE ASSESSEE HAD ITSELF ADDED BACK RS. 1,16,43,087/- OUT OF THE INTE REST PAID AS PER PROFIT & LOSS ACCOUNT AND HENCE NEEDS TO BE DELETED. ITA NO.-254/DEL/2020 BESTO ELECTRONICS. PAGE 2 OF 13 2. THAT IN THE ABSENCE OF MATERIAL ON RECORD TO PRO VE THAT THE PAYMENT OF ENHANCED REMUNERATION TO THE WHOLE TIME DIRECTOR WA S EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE SERVICE RENDERED THE LEARNED CIT(A) ERRED IN SUSTAINING THE DISALLOW ANCE OF RS. 6,00,000 AS MADE BY THE AO, WHICH NEEDS TO BE DELETED. 3. THAT THE LEARNED CIT ERRED IN NOT HOLDING THAT THE AO DISALLOWED THE RENT OF RS. 54,00,000 FOR PREMISES USED PARTIALLY FOR TH E RESIDENCE OF THE DIRECTOR AND PARTIALLY FOR BUSINESS PURPOSES U/S 37 OF THE A CT CONTRARY TO THE PROVISIONS OF SECTION 38 OF THE ACT AND AS SUCH THE DISALLOWANCE CANNOT BE SUSTAINED. (B) THE RETURN OF INCOME WAS FILED ON 30.09.2013 BY TH E ASSESSEE SHOWING TOTAL INCOME OF RS. 66,03,420/-. INITIAL ASSESSMENT ORDER DATED 18.01.2016 WAS PASSED BY THE ASSESSING OFFICER (AO, FOR SHORT) ON 18.01.20 16 MAKING AN ADDITION OF RS. 39,950/- ON ACCOUNT OF INTEREST ON TDS; THEREBY ASSESSING TH E TOTAL INCOME AT RS. 66,43,370/-. ORDER UNDER SECTION 263 OF INCOME TAX ACT (I.T. AC T, FOR SHORT) DATED 28.03.2018 WAS PASSED BY LD. PRINCIPAL COMMISSIONER OF INCOME TAX, (LD. PCIT, FOR SHORT), DIRECTING THE AO TO FRAME THE ASSESSMENT AFRESH. FRESH ASSES SMENT ORDER DATED 03.12.2018 WAS PASSED BY THE AO UNDER SECTION 263/143(3) OF I.T. A CT WHEREIN THE ASSESSEES INCOME WAS ASSESSED AT RS. 2,26,70,161/- (ROUNDED OFF TO 2 ,26,70,160/-). IN THE AFORESAID FRESH ASSESSMENT ORDER DATED 03.12.2018, ADDITIONS AMOUNTING TO RS. 1,00,66,740/- (ON ACCOUNT OF DISALLOWANCE OF INTEREST ON LOAN); RS. 6 LAKHS (ON ACCOUNT OF DISALLOWANCE OUT OF DIRECTORS REMUNERATION ) AND RS. 54 LAKHS ( ON ACCOUNT OF DISALLOWANCE OF RENT) WERE MADE BY THE AO. THE RELEVANT PORTION OF THE A SSESSMENT ORDER IS REPRODUCED BELOW FOR EASE OF REFERENCE: 6. FURTHER VIDE NOTESHEET ENTRY DATED 13.11.2018, THE CA/AR OF THE ASSESSEE WAS ASKED TO SUBMIT REPLY ACCORDING TO QUESTIONNAIRE DA TED 26.09.2018 ALONGWITH DOCUMENTARY EVIDENCES. IN RESPONSE, NEITHER ANYBOD Y ATTENDED NOR FILED ANY WRITTEN ITA NO.-254/DEL/2020 BESTO ELECTRONICS. PAGE 3 OF 13 SUBMISSION TILL DATE. THE ONUS TO PROVE GENUINENES S OF TRANSACTIONS IS ON ASSESSEE TO SUBSTANTIATE ITS CLAIM IN RETURN O INCOME. BUT THE ASSESSEE HAS FAILED TO DO THE SAME. AS THE ASSESSEE HAS FAILED TO SUBSTANTIATE ITS CLAI M, THE FOLLOWING DISALLOWANCE /ADDITION IS BEING MADE:- (I) INTEREST ON LOAN:- THE ASSESSEE COMPANY HAS ADVANCE LONG TERM LOAN OF RS. 22,54,94,660/- TO M/S DURGAS GLOBAL HOTEL U.K. RS. 24,44,560/- TO SIKANDRA AUTO INDIA , RS. 9,00,000/- TO S.C. S.C. BLOC AND R S. 9,98,570/- TO SUSHIL MOTORS. THE ASSESSEE HAS NOT CHARGED ANY INTEREST ON THESE ADVANCES WHEREAS THE ASSESSEE HAS PAID SIGNIFICANT AMOUNT AS INTEREST ON LOANS. REGARDING THESE ADVANCE/LOANS, THE AR OF THE ASSESS EE COMPANY SUBMITTED THAT THE ASSESSEE COMPANY IS EXPECTED BETTER RETURN S IN FUTURE FROM UK COMPANY AND HENCE NOT CHARGED ANY INTEREST. FOR RE ST ADVANCE/LOANS, THE AR ACTIVITIES, THOSE ARE NOT MATERIALIZED AT ALL. THE PLEA OF THE ASSESSEE COMPANY IS NOT ACCEPTABLE ON THE BASIS THAT ON ONE HAND THE ASSESSEE COMPANY IS PAYING INTEREST ON LOAN TAKEN FROM OTHERS AND ON TH E OTHER HAND THE ASSESSEE IS NOT RECEIVING INTEREST INCOME FROM THE LOAN/ADVA NCES GIV NE TO OTHERS. THE JUSTIFICATION SUBMITTED BY THE AR OF THE ASSESSEE C OMPANY IS NOT ACCEPTABLE HENCE, INTEREST ON LOAN OF RS. 1,00,66,740/- DEBITE D IN PROFIT & LOSS ACCOUNT IS HEREBY DISALLOWED. (DISALLOWANCE OF RS. 1,00,66,740/-) (II) DIRECTORS REMUNERATION:- THE ASSESSEE COMPANY HAS INCREASED REMUNERATION OF MRS. GEETANJALI BEHL FROM RS. 6,00,000/- DURING THE YEAR UNDER CONSIDERATION WHEREAS THERE IS DOWNFALL IN BUSINESS OF THE ASSESSEE COMPANY. THE AR OF THE ASSESSEE COMPANY SUBMITTED THAT THE R EMUNERATION IS DULY AUTHORIZED BY THE BOARD RESOLUTION. THIS PLEA OF A R OF THE ASSESSEE COMPANY IS NOT ACCEPTABLE ON THE BASIS THAT EVEN A PRIVATE LIMITED COMPANY MUST HAVE A CREDIBLE AND TRANSPARENT POLICY IN DETERMINING AN D ACCOUNTING FOR THE REMUNERATION OF THE DIRECTORS. DIRECTORS OR PROMOT ERS OF A PRIVATE COMPANIES CANNOT SIMPLY DIVERT THE FUNDS FROM CORPORATE ACCOU NTS TO THEIR PERSONAL ACCOUNTS IN THE NAME OF REMUNERATION, TO REDUCE THE TAX BURDENS OR FOR ANY OTHER REASONS. HENCE THE REMUNERATION OF RS. 6,00, 000/- ENHANCED DURING THE YEAR UNDER CONSIDERATION IS BEING DISALLOWED AN D ADDED TO THE INCOME OF THE ASSESSEE COMPANY. (DISALLOWANCE OF RS. 6,00,000/-) (III) RENT PAID FOR PROPERTY:_ THE AR OF THE ASSESSEE SUB MITTED THAT THE RENTED PROPERTY WAS NOT UTILIZED PERSONALLY AT ALL BY THE DIRECTORS. THIS PLEA OF THE ASSESSEE IS NOT ACCEPTABLE AS THE PLEA IS CONTRAVEN ING THE TERMS AND CONDITIONS OF THE LEASE DEED. PARA 1(B) OF THE LEA SE DEED CLEARLY STATE THAT THE PREMISES SHALL BE EXCLUSIVELY USED FOR THE RESI DENTIAL PURPOSE OF MRS. GEETANJALI BEHL, CHAIRPERSON OF THE LEASE COMPANY. ACCORDINGLY THE EXPENSES OF RS. 54,00,000/- CLAIMED BY ASSESSEE COMPANY IS D ISALLOWED AS THE EXPENDITURE IS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. (DISALLOWANCE OF RS. 54,00,000/-) ITA NO.-254/DEL/2020 BESTO ELECTRONICS. PAGE 4 OF 13 6.1 IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME AND THEREFORE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT, 1961 ARE BEING INITIATED SEPARATEL Y FOR FURNISHING INACCURATE PARTICULARS OF INCOME MENTIONED AT PARA 6 ABOVE. (C) THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A) . VIDE IMPUGNED APPELLATE ORDER DATED 13.11.2019, THE LD. CIT(A) DISMISSED AS SESSEES APPEAL, SUSTAINING ALL THE AFORESAID ADDITIONS MADE BY THE AO IN THE AFORESAID FRESH ASSESSMENT ORDER DATED 03.12.2018. THE RELEVANT PORTION OF THE AFORESAID IMPUGNED APPELLATE ORDER DATED 13.11.2019 IS REPRODUCED AS UNDER FOR EASE OF REFER ENCE: 6.1 GROUND NO.1:- THIS GROUND IS DIRECTED AGAINST ADDITION OF RS. 100 ,66,740/- U/S 36(L)(III) ON ACCOUNT OF DISALLOWANCE OF INTEREST AS THE APPELLANT EXTENDED INTEREST-FREE ADVANCES BY DIVERTING INTEREST-BEARING FUNDS FOR N ON-BUSINESS PURPOSES. DURING THE HEARING OF SET ASIDE CASE, THE APPELLANT SUBMITTED THAT THE APPELLANT IS EXPECTED TO GET BETTER RETURNS IN FUTURE AND THEREFORE, DID NO T CHARGE ANY INTEREST FROM THE PARTY. AS THIS JUSTIFICATION DOES NOT HAVE ANY MERIT, IT WAS NOT ACCEPTED. 6.2 DURING THE APPELLATE PROCEEDINGS, IT IS SUBMITTED T HAT THE APPELLANT HAS ALREADY ADDED BACK THE ENTIRE INTEREST AMOUNT OF RS . 1,16,83,520/- IN COMPUTATION OF INCOME AS WELL AS RETURN OF INCOME. THIS SUBMISSIO N WAS NOT MADE BEFORE THE AO. THE APPELLANT HAS NOT CLARIFIED WHY THE SUBMISSION WAS NOT MADE BEFORE THE AO. FURTHER, IT IS NOT SUPPORTED BY ANY DOCUMENTARY EVI DENCE LIKE RETURN OF INCOME. HENCE, THIS BEING AN ENTIRELY NEW ARGUMENT WITHOUT ANY BASIS IS REJECTED. 6.3 THE APPELLANT, AT ANY STAGE, HAS NOT ESTABLISHED TH E BUSINESS NEXUS OF INTEREST-FREE ADVANCES. IN VIEW OF THIS, IM NOT IN CLINED TO INTERFERE WITH THE DECISION OF THE AO AND THE ADDITION IS CONFIRMED. THIS GROUND I S RULED AGAINST THE APPELLANT. 6.4 GROUND NO.2:- THIS GROUND IS DIRECTED AGAINST ADDITION OF RS.6,00 ,000/- ON ACCOUNT OF DISALLOWANCE OF REMUNERATION PAID TO THE DIRECTOR. THE AO HAS NOTED THAT THE DIRECTOR RECEIVED REMUNERATION OF RS.6,00,000/- IN THE EARLIER YEAR WHICH WAS INCREASED TO RS. 12,00,000/- WHICH IS DOUBLE THE AM OUNT OF REMUNERATION IN THE EARLIER YEAR. AS AGAINST THIS PHENOMENON INCREASE OF REMUNE RATION, TODAY IS A DOWNFALL IN THE BUSINESS. THE APPELLANT HAS NOT BEEN ABLE TO ESTABL ISH THE JUSTIFICATION OF THIS EXCESSIVE PAYMENT WHEREAS AO HAS NOTED THAT BUSINES S IS GOING DOWN. ITA NO.-254/DEL/2020 BESTO ELECTRONICS. PAGE 5 OF 13 6.5 DURING THE APPELLATE PROCEEDINGS, THE APPELLANT HAS AGITATED THAT THE AO HAS NOT MENTIONED ANY SECTION UNDER WHICH THE DISALLOWA NCE WAS MADE. IT ALSO SUBMITTED THAT IF THE DISALLOWANCE HAS BEEN MADE U/S 40A(2), THE AO HAD TO DETERMINE A REASONABLE REMUNERATION WHICH WAS NOT DONE. HOWEVER , IT IS OBSERVED THAT THE AO HAS ALREADY ALLOWED RS. 6,00,000/- AS REMUNERATION AND DISALLOWED ONLY THE INCREASED PART OF REMUNERATION DURING THE YEAR. 6.6 NO JUSTIFICATION WAS GIVEN DURING THE APPELLATE PR OCEEDINGS FOR THIS PHENOMENAL INCREASE IN THE REMUNERATION OF THE DIRE CTOR. THE LOGIC OF THE AO APPEARS JUSTIFIED THAT THIS IS NOTHING BUT A PLOY TO DIVERT THE FUNDS FROM CORPORATE ACCOUNTS TO PERSONAL ACCOUNTS IN ORDER TO SUPPRESS THE TAXABLE INCOME OF THE COMPANY. THE ADDITION IS, THEREFORE, SUSTAINED AND THE GROUND IS RULED AGAINST THE APPELLANT. 6.7 GROUND NO.3:- THIS GROUND IS DIRECTED AGAINST ADDITION OF RS.54,0 0,000/- ON ACCOUNT OF DISALLOWANCE OF RENTAL EXPENDITURE. THE AO HAS NOTED THAT THE LEASE DEED FOR RENTED/LEASED PROPERTY CLEARLY SHOWS THAT THE P REMISES WERE EXCLUSIVELY USED BY THE DIRECTOR FOR RESIDENTIAL PURPOSES. HOWEVER, THE APPELLANT HAD SUBMITTED THAT THE PROPERTY WAS NOT UTILIZED PERSONALLY BY THE DIRECTO R. AS THE DOCUMENTARY EVIDENCE GOES AGAINST THE SUBMISSION OF THE APPELLANT, THE AO MAD E ADDITION ACCORDINGLY. 6.8 DURING THE APPELLATE PROCEEDINGS, IT WAS AGITATED T HAT THE RENT PAID FOR RESIDENTIAL ACCOMMODATION OF THE DIRECTOR IS A BUSI NESS EXPENDITURE. NO LEGAL JUSTIFICATION OR ANY JUDICIAL PRECEDENCE HAS BEEN R ELIED ON BY THE APPELLANT IN SUPPORT OF THE CLAIM. THE SUBMISSION IS DEVOID OF MERIT AN D IS REJECTED. THIS GROUND IS RULED AGAINST THE APPELLANT. (D) ASSESSEE FILED THE PRESENT APPEAL IN INCOME TAX APPELLATE TRIBUNAL (ITAT, FOR SHORT) AGAINST THE AFORESAID IMPUGNED APPELLATE ORD ER DATED 03.12.2018 OF LD. CIT(A). VIDE ORDER DATED 06.03.2020 IN S.A. NO. 162/DEL/202 0, COORDINATE BENCH OF ITAT, DELHI STAYED THE ENTIRE DEMAND IN THE CASE OF THE ASSESSE E WHICH RESULTED FROM THE AFORESAID IMPUGNED APPELLATE ORDER DATED 13.11.2019 OF THE L D. CIT(A). IN THE APPELLATE PROCEEDINGS IN ITAT, THE FOLLOWING PAPERS WERE FILE D FROM THE ASSESSEES SIDE: ITA NO.-254/DEL/2020 BESTO ELECTRONICS. PAGE 6 OF 13 (1) PAPER BOOK CONSISTING OF THE FOLLOWING I. COPY OF WRITTEN SUBMISSIONS DATED 05/11/2019 FILED BEFORE CIT(APPEALS) II. COPY OF COMPUTATION OF TOTAL INCOME FOR A.Y. 2013-1 4 III. COPY OF ABSTRACT OF PROFIT & LOSS AND FINANCE CHARG ES FOR ACCOUNTING YEAR 2012- 13. (2) JUDICIAL PRONOUNCEMENT: I. ORDER DATED 30 JUNE, 2020 IN THE CASE OF IKEA TRADI NG (INDIA) (P.) LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(1) , NEW DELH I [2021] 123 TAXMANN.COM 129 (DELHI-TRIB.) II. ORDER DATED 22.11.2019 PASSED BY ITAT, MUMBAI IN TH E CASE OF ACUITY HOLDINGS PVT. LTD. VS DY. COMMISSIONER OF INCOME TAX IN ITA NO. 4011/MUM.2017 (E) FIRST GROUND OF APPEAL IN THE PRESENT APPEAL BEFOR E US FILED BY THE ASSESSEE IS REGARDING THE AFORESAID DISALLOWANCE OF RS. 1,00,66 ,740/- ON ACCOUNT OF DISALLOWANCE OF INTEREST. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSEL FOR ASSESSEE DREW OUR ATTENTION TO COMPUTATION OF TOTAL INCOME FILED BY T HE ASSESSEE ALONGWITH RETURN OF INCOME; TO SHOW THAT THE AMOUNT OF INTEREST OF RS. 1,16,43,087/- WAS SUO-MOTO DISALLOWED BY THE ASSESSEE; AND THAT THE AFORESAID AMOUNT OF RS. 1,00,66,740/- DISALLOWED BY THE AO WAS NOT EVEN CLAIMED BY THE AS SESSEE AS AN EXPENDITURE IN THE RETURN OF INCOME. THE LD. COUNSEL FOR ASSESSEE STR ONGLY CONTENDED THAT THERE WAS NO CASE FOR DISALLOWANCE OF RS. 1,00,66,740/- WHEN THI S AMOUNT WAS NOT EVEN CLAIMED FROM THE ASSESSEES SIDE. THE LEARNED SENIOR DEPAR TMENTAL REPRESENTATIVE (LD. SR. DR, FOR SHORT) NEITHER DISPUTED THIS FACTUAL POSIT ION, NOR THE CONTENTION MADE BY THE LD. COUNSEL FOR THE ASSESSEE. HOWEVER, SHE RELIED ON THE ORDERS OF THE LD. CIT(A) AND THE AO. WE FIND THAT THERE IS NO DISPUTE ON THE FA CT THAT THE AFORESAID AMOUNT OF RS. ITA NO.-254/DEL/2020 BESTO ELECTRONICS. PAGE 7 OF 13 1,00,66,740/- DISALLOWED BY THE AO, AND SUSTAINED B Y THE LD. CIT(A), WAS NOT EVEN CLAIMED BY THE ASSESSEE AS AN EXPENDITURE IN THE RE TURN OF INCOME. THAT BEING THE CASE, WE AGREE WITH THE CONTENTION OF THE LD. COUNS EL FOR ASSESSEE THAT THERE WAS NO CASE FOR DISALLOWANCE OF THE AMOUNT OF RS. 1,00,66, 740 ON ACCOUNT OF INTEREST EXPENSES. WE DIRECT THE AO TO DELETE THIS AMOUNT. ACCORDINGLY, FIRST GROUND OF APPEAL IS ALLOWED. (F) THE THIRD GROUND OF APPEAL IS REGARDING DISALLOWAN CE OF RENT PAID, AMOUNTING TO RS. 54,00,000/-. RELEVANT PORTIONS OF THE ORDER OF THE AO AND LD. CIT(A) HAVE ALREADY BEEN REPRODUCED IN FOREGOING PARAGRAPHS (B) AND (C) OF THIS ORDER RESPECTIVELY. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSEL FOR ASSE SSEE DREW OUR ATTENTION TO ORDER OF ITAT, MUMBAI IN THE CASE OF ACUITY HOLDINGS PVT. LT D. VS. DCIT IN ITA NO. 4011/MUM/2017. THE LD. COUNSEL FOR THE ASSESSEE AL SO RELIED ON THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) IN WRITTEN SUBMISSIONS D ATED 05 TH NOVEMBER, 2019 WHICH IS REPRODUCED AS BELOW: 6. GROUND- OF APPEAL NO. 3: THE GROUND OF APPEAL R ELATES TO DISALLOWANCE OF RS.54,00,000 PAID BY THE ASSESSES COMPANY FOR LEASE PROPERTY TAKEN ON LEASE FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE COMPANY.' D URING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE' AO, FOLLOWING THE DIREC TION OF LEARNED C.I.T. SOUGHT REASON WHY SUCH EXPENSE MAY NOT BE DISALLOWED AS TH E PREMISES WAS USED BY DIRECTOR, THE ASSESSEE FILED REPLY WHICH IS REPRODUCED IN TH E ASSESSMENT ORDER, BUT THE AO BEING DISSATISFIED DISALLOWED THE RENT PAID HOLDIN G THAT- THE EXPENDITURE 'IS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 7. IT IS HUMBLY SUBMITTED THAT THE AO ERRED IN DIS ALLOWING THE SAID RENT AMOUNT PAID, BY THE ASSESSEE COMPANY EVEN IF THE PREMISES IN QUESTION WAS PARTIALLY USED FOR RESIDENCE OF WORKING DIRECTOR OF THE COMPANY. I T IS SETTLED LAW THAT THE DIRECTOR ITA NO.-254/DEL/2020 BESTO ELECTRONICS. PAGE 8 OF 13 WHO WORKS AS A WHOLETIME DIRECTOR IS AKIN TO ANY OT HER EMPLOYEE RENDERING SERVICES TO A COMPANY AND RENT PAID FOR PREMISES GIVEN TO EM PLOYEES IS FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. FURTHER, SECTION 30 OF TH E ACT PROVIDES FOR ALLOWABILITY OF RENT AND SECTION 38 OF THE ACT FOR ANY APPORTIONMEN T THEREOF (IF REQUIRED). THE DISALLOWANCE U/S 37 OF THE ACT IS OTHERWISE NOT SUS TAIN ABLE AS THE SAID SECTION WILL APPLY TO INSTANCES, OF EXPENSES WHICH ARE NOT COVER ED IN THE SPECIFIC PROVISIONS OF SECTION 30 TO 36 OF THE ACT, WHICH IS NOT THE CASE- IN PRESENT APPEAL. IN THE CIRCUMSTANCES IT IS PRAYED THAT THE DISALLOWANCE BE DELETED AND APPEAL ALLOWED. (F.1) THE LD. SR. DR RELIED ON THE ORDERS OF THE LD. CIT (A) AND THE AO. (F.2) WE HAVE TAKEN DUE COGNIZANCE OF THE SUBMISSIONS M ADE BY THE ASSESSEE IN THE APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A). WE HA VE ALSO CONSIDERED THE JUDICIAL PRONOUNCEMENT AND OTHER MATERIALS BROUGHT TO OUR AT TENTION. WE HAVE PERUSED THE MATERIALS ON RECORD. WE FIND THAT, IT IS THE ASSES SEES CASE THAT DIRECTOR WHO WORKS AS THE WHOLE TIME DIRECTOR IS AKIN TO ANY OTHER EMPLOY EE RENDERING SERVICES TO THE COMPANY AND RENT PAID FOR PREMISES GIVEN TO EMPLOYE E IS FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE. AT PARAGRAPH 6.8 OF HER IMPUGNED A PPELLATE ORDER, DATED 13.11.2019 OF LD. CIT(A) SHE HAS NOTED THE ASSESSEES CONTENTI ON THAT RENT PAID FOR RESIDENTIAL ACCOMMODATION OF THE DIRECTOR IS A BUSINESS EXPENDI TURE. HOWEVER, ON PERUSAL OF THE RECORDS WE FIND THAT DETAILS OF WHETHER ANY TAX WAS DEDUCTED AT SOURCE BY THE ASSESSEE ON ACCOUNT OF PERQUISITE TO THE DIRECTOR BY WAY OF RENT-FREE ACCOMMODATION, WITHIN THE MEANING OF SECTION 17(2) OF INCOME TAX ACT READ WIT H SECTION 192 OF INCOME TAX ACT; IS NOT AVAILABLE ON THE RECORDS. UNDER SECTION 17( 2) OF INCOME TAX ACT, RENT FREE ACCOMMODATION PROVIDED BY EMPLOYER TO AN EMPLOYEE I S THE EMPLOYEES INCOME UNDER THE HEAD SALARY, BEING A PERQUISITE. FURTHER, UN DER SECTION 192 OF I.T. ACT, THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE IN RE SPECT OF SALARY PAYMENT MADE TO THE ITA NO.-254/DEL/2020 BESTO ELECTRONICS. PAGE 9 OF 13 EMPLOYEE. WE FIND THAT THE LOWER AUTHORITIES - THE AO AS WELL AS THE LD. CIT(A) - HAVE NOT EXAMINED THIS ASPECT; AND THE RELEVANT FACTS AR E NOT AVAILABLE BEFORE US IN THE RECORDS. THE ASSESSEE HAS ALSO MADE A REFERENCE TO SECTION 38 OF I.T. ACT FOR APPORTIONMENT OF EXPENSES U/S 38 OF I.T. ACT. UNDER SECTION 38 OF I.T. ACT, A PORTION OF THE EXPENSES IS ALLOWABLE TO THE ASSESSEE AS DEDUCT ION, HAVING REGARD TO USE OF THE PREMISES / BUILDING FOR THE PURPOSES OF ASSESSEES BUSINESS. WE FIND THAT THE LOWER AUTHORITIES THE AO AS WELL AS THE LD. CIT(A) - HA VE NOT CONSIDERED THE APPLICABILITY OF SECTION 38 OF I.T. ACT; AND FURTHER, THAT THE RELEV ANT FACTS ARE NOT AVAILABLE ON THE RECORDS ON THE BASIS OF WHICH FAIR APPORTIONMENT CA N BE MADE. MOREOVER, NEITHER THE ASSESSEE HAS FURNISHED DETAILS FOR SUCH APPORTIONME NT; NOR THE LOWER AUTHORITIES - THE AO AS WELL AS THE LD. CIT(A)-HAVE CONSIDERED APPORT IONMENT OF EXPENSES U/S 38(1) OF I.T. ACT. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE RELEVANT FACTS FOR DECIDING THIS GROUND OF APPEAL ARE NOT AV AILABLE ON RECORDS OF THE TRIBUNAL; AND THAT THESE RELEVANT FACTS ARE NEEDED TO BE BROU GHT ON RECORD. THEREFORE, WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO WITH THE DIR ECTION TO PASS A FRESH ORDER AS PER LAW FOR DECIDING THE ISSUE REGARDING ALLOWABILITY OF RE NT PAID AMOUNTING TO RS. 54,00,000/-; AFTER PROVIDING THE ASSESSEE A REASONABLE OPPORTUNI TY. FOR STATISTICAL PURPOSES GROUND 3 IS PARTLY ALLOWED. (G) THE SECOND GROUND OF APPEAL IS REGARDING DISALLOWA NCE OF RS. 6 LAKHS OUT OF AN AMOUNT OF RS. 12 LAKHS PAID BY THE ASSESSEE TOWARDS DIRECTOR REMUNERATION. THIS DISALLOWANCE WAS MADE BY THE AO, ALLEGING THAT THE AMOUNT OF RS. 6 LAKHS WAS DIVERTED ITA NO.-254/DEL/2020 BESTO ELECTRONICS. PAGE 10 OF 13 FROM THE CORPORATE ACCOUNTS (I.E FROM THE ACCOUNTS OF THE ASSESSEE) TO THE PERSONAL ACCOUNTS (I.E. REMUNERATION PAID TO THE DIRECTORS), TO REDUCE THE TAX BURDEN OR ANY OTHER REASON. THE LD. CIT(A) HAS STATED IN HER ORD ER THAT NO JUSTIFICATION WAS GIVEN DURING THE APPELLATE PROCEEDINGS FOR INCREASE IN TH E REMUNERATION OF THE DIRECTOR. SHE CONCLUDED THAT THE LOGIC OF THE AO, THAT THIS WAS N OTHING BUT A PLOY, DIVERT THE FUNDS FROM CORPORATE ACCOUNTS TO PERSONAL ACCOUNT IN ORDE R TO SUPPRESS THE TAXABLE INCOME OF THE COMPANY, APPEARED JUSTIFIED. AT THE TIME OF HE ARING BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE OBSERVATION OF THE LD. CIT(A), THAT NO JUSTIFICATION WAS GIVEN DURING APPELLATE PROCEEDING, WAS FACTUALLY IN CORRECT. HE DREW OUR ATTENTION TO WRITTEN SUBMISSIONS DATED 05.11.2019 IN WHICH DETAI LED SUBMISSIONS WERE MADE BY THE ASSESSEE BEFORE LD. CIT(A). THE LD. COUNSEL FOR AS SESSEE ALSO RELIED ON CBDT CIRCULAR NO. 6-P DATED 6-7-1968 WHICH STATES THAT NO DISALLO WANCE IS TO BE MADE U/S 40A(2) IN RESPECT OF THE PAYMENTS MADE TO RELATIVES AND SISTE R CONCERNS WHERE THERE IS NO ATTEMPT TO EVADE TAX-WHETHER SINCE ASSESSING OFFICE R HAD NOT BROUGHT ANY COMPARABLE CASE TO DEMONSTRATE THAT PAYMENTS MADE BY ASSESSEE WERE EXCESSIVE /UNREASONABLE AND FACT THAT PAYEES WERE ALSO ASSESSED TO TAX AT S AME RATE OF TAX, COMMISSIONER (APPEALS) HAD RIGHTLY DELETED ADDITION. THE LD. CO UNSEL FOR ASSESSEE CONTENDED THAT THE ASSESSEE COMPANY AS WELL AS THE DIRECTOR TO WHO M THE REMUNERATION WAS PAID, BOTH WERE IN THE HIGHEST TAX BRACKET; AND PAID TAX AT TH E HIGHEST RATE. THEREFORE, THERE WAS NO CASE FOR ANY DISALLOWANCE OUT OF REMUNERATION PA ID TO THE DIRECTOR. THE LD. COUNSEL FOR ASSESSEE ALSO RELIED ON ORDER OF CO-ORDINATE BE NCH OF ITAT, DELHI IN THE CASE OF IKEA TRADING (INDIA)(P.)LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX [2012] 123 ITA NO.-254/DEL/2020 BESTO ELECTRONICS. PAGE 11 OF 13 TAXMANN.COM 129 (DELHI-TRIB.). THE LD. SR. DR FOR REVENUE RELIED ON THE ORDERS OF THE AO AND THE LD. CIT(A). WE HAVE HEARD BOTH SIDES. WE HAVE PERUSED THE MATERIALS ON RECORD. WE HAVE CONSIDERED THE JUDICIAL PRONOUNCEM ENT BROUGHT TO OUR ATTENTION. ALTHOUGH IT HAS BEEN CONTENDED BY THE LD. COUNSEL F OR THE ASSESSEE, FOR CLAIMING BENEFIT OF CBDT CIRCULAR DATED 6-7-1968, THAT THE A SSESSEE COMPANY AS WELL AS THE DIRECTOR ARE BOTH IN THE HIGHEST TAX BRACKET; RELEV ANT PAPERS TO SHOW THE RATE AT WHICH THE DIRECTOR IS TAXED IS NOT AVAILABLE ON OUR RECOR DS. MOREOVER, WHETHER THE ASSESSEE HAS DEDUCTED TAX AT SOURCE UNDER SECTION 192 OF I.T . ACT IN RESPECT OF THE DISPUTED AMOUNT OF ENHANCED REMUNERATION PAID TO THE DIRECTO R, IS ALSO NOT AVAILABLE ON OUR RECORD. WE FIND THAT THE LOWER AUTHORITIES, AO AS WELL AS LD. CIT(A), HAVE ALSO NOT EXAMINED THESE ASPECTS; AND HAVE NOT BROUGHT RELEVA NT FACTS ON RECORD. FURTHER, WE FIND THAT FOR THE PURPOSES OF SECTION 40A(2) OF I.T . ACT, RELEVANT FACTS PERTAINING TO ENHANCED REMUNERATION PAID TO THE DIRECTOR, SUCH AS FREE MARKET VALUE, LEGITIMATE NEEDS OF ASSESSEES BUSINESS AND BENEFIT DERIVED BY / ACCRUING TO THE ASSESSEE ARE NOT AVAILABLE ON THE RECORDS. IN VIEW OF THE FOREGOIN G, WE ARE OF THE VIEW THAT THE RELEVANT FACTS FOR DECIDING THIS GROUND OF APPEAL ARE NOT AV AILABLE ON RECORDS OF THE TRIBUNAL; AND THAT THESE RELEVANT FACTS ARE NEEDED TO BE BROU GHT ON RECORD. THEREFORE, WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO WITH THE DIR ECTION TO PASS A FRESH ORDER AS PER LAW ON THE DISPUTE UNDER SECOND GROUND OF APPEAL. FOR STATISTICAL PURPOSES, 2 ND GROUND IS PARTLY ALLOWED. ITA NO.-254/DEL/2020 BESTO ELECTRONICS. PAGE 12 OF 13 (H) IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 28/01/20 21 . SD/- SD/- (SUDHANSHU SRIVASTAVA) (ANADEE NATH MIS SHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28/01/2021 (POOJA) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO.-254/DEL/2020 BESTO ELECTRONICS. PAGE 13 OF 13 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER