The DCIT, Circle-1(2), Baroda V. Fortune Infotech Ltd., Baroda

ITA 2995/AHD/2009

• Counselvise Citation: 299520514 RSA 2009
• Duration Of Justice: 1 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 02-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 09-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: M G PATEL
• Keywords: Business income; Fair market value; Commercial expediency; Capital expenditure
• Section: 143(3); 37(1)

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH . .. . . .. . , , , , !' !' !' !', , , , #$ #$ #$ #$ %% % & %% % & %% % & %% % &, , , , ' ' ' ' ( ' ( ' ( ' ( ' BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND MUKUL KR. SHRAWAT, JUDICIAL MEMBER) ITA NO.2734 /AHD/2009 [ASSTT.YEAR : 2005-2006] FORTUNE INFOTECH LTD. PLOT NO.160/4, OLD CHHANI ROAD, BARODA. PAN : AAACC 7460 R /VS. ACIT, CIR.1(2) BARODA. ITA NO.2995/AHD/2009 [ASSTT.YEAR : 2005-2006] ACIT, CIR.1(2) BARODA. /VS. FORTUNE INFOTECH LTD. PLOT NO.160/4, OLD CHHANI ROAD,BARODA. PAN : AAACC 7460 R ( (( (*+ *+ *+ *+ / APPELLANT) ( (( (,-*+ ,-*+ ,-*+ ,-*+ / RESPONDENT) ' . / (/ REVENUE BY : SHRI C.K. MISHRA 1& . / (/ ASSESSEE BY : SHRI M.G. PATEL (2 / O R D E R PER G.D. AGARWAL, VICE-PRESIDENT : THESE ARE TWO APPEALS BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, BARODA ARISING OUT OF TH E ORDER OF THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOM E TAX ACT, 1961. SINCE ASSESSEE BEING SAME IN BOTH THE APPEALS, WE D ISPOSE OF BOTH THE APPEALS BY THIS COMMON ORDER. ITA NO.2734/AHD/2009 (ASSESSEE) 2. THE FIRST GROUND NO.1 OF THE ASSESSEES APPEAL R EADS AS UNDER: 1. LEARNED CIT (APPEALS) ERRED IN LAW AS WELL AS O N FACTS OF THE CASE BY CONFIRMING THE DISALLOWANCE OF RS.3,35,671/ - BEING EXPENDITURE INCURRED BY THE APPELLANT ON CERTIFICAT ION VIZ. BS 7799 ITA NO.2734 AND 2995/AHD/2009 -2- AND ISO 9001 HOLDING THE SAME AS BEING IN NATURE OF CAPITAL EXPENDITURE. 3. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE SIMILAR ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR A.Y.2004-05 WHEREIN THE ITAT IN ITS ORDER IN ITA NO.1384/AHD/20 08 DATED 15-7-2011 ALLOWED THE CLAIM OF THE ASSESSEE. THE LEARNED COU NSEL HAS PLACED ON RECORD A COPY OF THE ABOVE ORDER. THE LEARNED DR H AS NOT CONTROVERTED TO THE ABOVE SUBMISSION OF THE LEARNED COUNSEL. 4. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE ASID ES AND PERUSAL OF THE MATERIAL AND THE ORDER OF THE ITAT CITED SUPRA, WE FIND THAT FOR THE ASSTT.YEAR 2004-05, THE ASSESSEE HAS MADE SIMILAR C LAIM, WHICH WAS ALLOWED BY THE ITAT IN THE ORDER CITED SUPRA. THE RELEVANT FINDINGS OF THE ITAT READ AS UNDER: 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE AFORECITED DECISIONS. WHILE AD JUDICATING THE CLAIM IN THE CONTEXT OF CLAIM OF EXPENDITURE FOR OB TAINING ISO 9002 CERTIFICATION, A CO-ORDINATE BENCH IN THEIR DECISIO N IN TIRUPATI MICROTECH (P) LTD. (SUPRA), WHILE REFERRING TO DECI SION HONBLE SUPREME COURT IN THE CASE OF EMPIRE JUTE CO. LTD. V S. CIT (1980) 124 ITR 1 CONCLUDED THAT SINCE BY MAKING PAYMENTS F OR OBTAINING ISO 9002 CERTIFICATION, THE FIXED CAPITAL OF THE CO MPANY DID NOT ENHANCE IN ANY MANNER; IT RATHER CREATED A POSITIVE IMAGE OF PRODUCTS OF THE ASSESSEE FOR THE SMOOTH CONDUCT OF THE BUSINESS, EXPENDITURE WAS REVENUE IN NATURE. FOLLOWING THIS D ECISION, ANOTHER BENCH IN CLIMATE SYSTEMS INDIA LTD.(SUPRA) ALLOWED THE CLAIM OF THE ASSESSEE ON ACCOUNT OF ISO CERTIFICATI ON CHARGES. IN THE LIGHT OF VIEW TAKEN IN THESE DECISIONS, ESPECIA LLY WHEN THE ID. DR DID NOT PLACE ANY MATERIAL BEFORE US SO AS TO EN ABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER NOR BROUGHT TO OUR N OTICE ANY CONTRARY DECISION, WE HAVE NO ALTERNATIVE BUT TO AL LOW THE CLAIM OF THE ASSESSEE. THEREFORE, GROUND NO.1 IN THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.2734 AND 2995/AHD/2009 -3- ADMITTEDLY, THE FACTS AND CIRCUMSTANCES OF THE CASE OF THIS YEAR ARE SIMILAR, THEREFORE, RESPECTFULLY FOLLOWING THE ABOV E ORDER OF THE TRIBUNAL, WE ALLOW THIS GROUND OF THE ASSESSEE. 5. GROUND NO.2 OF THE ASSESSEES APPEAL READS AS UN DER: 2. THE LD.CIT(A) HAS ERRED IN LAW AS WELL AS ON FA CTS OF THE CASE BY CONFIRMING THE DISALLOWANCE OF RS.2,52,000/- MAD E U/S.40A(2)(B) OF THE ACT IN RESPECT OF LEASE RENT P AID. 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE WAS F AIR ENOUGH TO ADMIT THAT SIMILAR CLAIM OF THE ASSESSEE FOR A.Y.2004-200 5 WAS REJECTED BY THE TRIBUNAL VIDE THE ORDER CITED SUPRA, WHEREIN THE TR IBUNAL HELD AS UNDER: 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY, M/S PACKING PRODUCTS (P) LT D., THE LESSOR COMPANY WITH WHOM INTEREST FREE DEPOSIT OF RS.40 LA CS WAS MADE, FALLS WITHIN THE DEFINITION OF PERSON U/S 40A(2)( B) OF THE ACT. IN THE PRECEDING YEAR , THE ASSESSEE PAID RENT @ RS.30 ,000 PM TO THE SAID LESSOR FOR USE OF THEIR PREMISES AND THAT WAS CONSIDERED REASONABLE. IN THE YEAR UNDER CONSIDERATION, THE AS SESSEE REDUCED THE RENT TO RS. 1,000 PM W.E.F OCTOBER,2003. WITHOU T ANY REASONS AND ALSO MADE AN INTEREST FREE DEPOSIT OF RS.40 LAC S WITH THE LESSOR, THE ASSESSEE ADMITTED BEFORE THE AO THAT NORMAL INT EREST RATE PREVAILING DURING THE YEAR WOULD BE @15% AND TO THA T EXTENT INTEREST WAS FOREGONE BY THE ASSESSEE ON THE SAID A MOUNT. DESPITE SPECIFIC REQUEST BY THE BENCH, THE ID. AR DID NOT E XPLAIN THE PURPOSE OF SAID INTEREST FREE DEPOSIT WITH THE LESS OR OR REDUCING THE RENT TO RS.1,000/- PM W.E.F OCTOBER,2003. A PLAIN R EADING OF THE PROVISIONS OF SECTION 40A(2) OF THE ACT REVEALS THA T WHERE AN ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT IS REQUIRED TO BE MADE OR HAS BEEN MADE TO ANY PERSON REFERRED TO IN CLAUSE (B) OF SECTION 40A(2) OF THE ACT AND THE ASS ESSING OFFICER IS OF THE OPINION THAT SUCH EXPENDITURE IS EXCESSIVE O R UNREASONABLE HAVING REGARD TO ( A ) FAIR MARKET VALUE OF THE GOO DS. SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE; OR (B) TH E LEGITIMATE NEEDS ITA NO.2734 AND 2995/AHD/2009 -4- OF THE BUSINESS OF THE ASSESSEE; OR (C) THE BENEFIT S DERIVED BY OR ACCRUING TO THE ASSESSEE ON RECEIPT OF SUCH GOODS, SERVICES OR FACILITIES, THEN THE ASSESSING OFFICER SHALL NOT AL LOW AS A DEDUCTION SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY T HE ASSESSING OFFICER TO BE EXCESSIVE OR UNREASONABLE. THEREFORE, IT BECOMES APPARENT THAT THE ASSESSING OFFICER IS REQUIRED TO RECORD A FINDING AS TO WHETHER THE EXPENDITURE IS EXCESSIVE OR UNREA SONABLE IN RELATION TO ANY ONE OF THE THREE REQUIREMENTS PRESC RIBED, WHICH ARE INDEPENDENT AND ALTERNATIVE TO EACH OTHER. ALL THE THREE REQUIREMENTS NEED NOT EXIST SIMULTANEOUSLY. IN A GI VEN CASE, IF ANY ONE CONDITION IS SHOWN TO BE SATISFIED THE PROVISIO N CAN BE INVOKED AND APPLIED, IF THE FACTS SO WARRANT. AS ALREADY NO TED HEREINBEFORE, THE ASSESSING OFFICER HAS HELD A PART OF THE EXPEND ITURE TO BE EXCESSIVE HAVING REGARD TO THE FAIR MARKET VALUE OF THE FACILITIES, WHICH ADMITTEDLY AMOUNTED TO RS.30000/- PM AND FOR RECORDING SUCH A FINDING COGENT REASONS ARE ASSIGNED BY THE A O. THE ID. AR DID NOT EVEN WHISPER BEFORE US AS TO THE PURPOSE OR COMMERCIAL EXPEDIENCY OF THE AFORESAID INTEREST FREE DEPOSIT O F RS.40 LACS NOR DISPUTED THE INTEREST @15% PA PREVAILING DURING THE YEAR AND NOR EVEN AS TO WHY RENT WAS REDUCED TO RS.1000/- PM DUR ING THE YEAR AND FURTHER DID NOT EXPLAIN EVEN THE COMMERCIAL EXP EDIENCY IN DOING SO. IN THE LIGHT OF THE AFORESAID POSITION IN LAW AND THE FINDINGS RECORDED BY THE COMMISSIONER (APPEALS) AND THE ASSESSING OFFICER AND IN THE ABSENCE OF ANY COGENT BASIS, IT IS NOT POSSIBLE TO HOLD THAT THERE IS ANY LEGAL INFIRMITY IN THE IMPUGNED ORDER OF THE ID. CIT(A) SO AS TO WARRANT INTERFEREN CE. THEREFORE, GROUND NO.2 IN THE APPEAL OF THE ASSESSEE IS DISMIS SED. ADMITTEDLY, FACTS OF THE YEAR UNDER APPEAL ARE IDEN TICAL, THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE DECISION OFT HE IT AT, WE REJECT GROUND NO.2 OF THE ASSESSEES APPEAL. 7. GROUND NO.3 OF THE ASSESSEES APPEAL READS AS UN DER: THE LD.CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS OF THE CSE BY CONFIRMING THE DISALLOWANCE OF RS.2,97,570/- BEING EXCHANGE LOSS. 8. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE AO DISALLOWED FOR EIGN EXCHANGE ITA NO.2734 AND 2995/AHD/2009 -5- FLUCTUATION LOSS OF RS.2,97,570/- ON THE GROUND THA T THE SAME IS CONTINGENT LIABILITY ARISING FROM THE NOTIONAL VALUATION OF TH E EXCHANGE RATES PREVAILING AT THAT TIME. IT IS SUBMITTED THAT AS P ER THE ACCOUNTING STANDARD FOLLOWED BY THE ASSESSEE, THE EFFECT OF THE EXCHANG E RATE FLUCTUATION HAS TO BE GIVEN I.E. IN CASE OF PROFIT THE SAME SHOULD BE OFFERED TO THE TAXATION WHILE IN LOSS, THE SAME SHOULD BE TREATED AS BUSINE SS EXPENDITURE. THE CIT(A) FOLLOWING HAS PREDECESSORS ORDER FOR A.Y.20 04-05 DISMISSED THE CLAIM OF THE ASSESSEE, HENCE THE ASSESSEE IS BEFORE US. 9. THE LEARNED DR, RELIED UPON THE ORDERS OF THE AU THORITIES BELOW. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THIS ISSUE TO BE NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE APEX COURT IN THE CA SE OF CIT VS. WOODWARD GOVERNOR INDIA P. LTD., 312 ITR 254 (SC) W HEREIN THEIR LORDSHIPS HELD AS UNDER: LOSS SUFFERED BY THE ASSESSEE ON ACCOUNT OF FLUCT UATION IN THE RATE OF FOREIGN EXCHANGE AS ON THE DATE OF THE BALANCE S HEET IS AN ITEM OF EXPENDITURE UNDER SECTION 37(1) OF THE ACT. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE DECISIO N OF THE HONBLE APEX COURT, WE DELETE THE DISALLOWANCE OF RS.2,97,570/- BEING EXCHANGE LOSS AND ALLOW GROUND NO.3 OF THE ASSESSEES APPEAL. 11. GROUND NO.4 OF THE ASSESSEES APPEAL READS AS U NDER: 4. THE LD. CIT(A) ERRED IN LAW AS WELL AS ON FACTS OF THE CASE BY NOT ALLOWING DEDUCTION U/S.10B OF THE ACT IN RESPEC T OF SUBSIDY AMOUNT OF RS.50,760/-HOLDING THE SAME AS NOT BEING BUSINESS INCOME. 12. THE ASSESSEE RECEIVED INCENTIVE RECEIPT FROM TH E GUJARAT GOVERNMENT OF RS.50,760/- FOR ISO/BSS7799 CERTIFICA TION. THE ASSESSEE ITA NO.2734 AND 2995/AHD/2009 -6- TREATED THE SAME AS PROFIT DERIVED FROM THE EXPORT OF COMPUTER SOFTWARE BUSINESS OF THE ASSESSEE, WHICH THE AO DISALLOWED O N THE GROUND THAT THE SAID RECEIPTS IS NOTHING TO DO WITH THE PROFITS DER IVED FROM THE EXPORTS CARRIED OUT BY THE ASSESSEE. THE CIT(A) CONFIRMED T HE DISALLOWANCE MADE BY THE AO. 13. AT THE TIME OF HEARING BEFORE US, THE LEARNED C OUNSEL FOR THE ASSESSEE FAIRLY ADMITTED THAT FOR THE A.Y.2004-05, SIMILAR CLAIM WAS REJECTED BY THE ITAT IN ASSESSEES OWN CASE CITED S UPRA. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AU THORITIES BELOW. 14. HAVING HEARD BOTH THE SIDES AND PERUSAL THE MAT ERIAL PLACED BEFORE US, WE FIND THAT THE ITAT IN ASSESSEES OWN CASE OF A.Y.2004-05 REJECTED THE SIMILAR CLAIM OF THE ASSESSEE BY HOLDING THAT T HE INCENTIVE GIVEN TO THE ASSESSEE IS FOR ENCOURAGING BUSINESS OF INFORMATION TECHNOLOGY AND IS IN NO WAY CONNECTED WITH THE EXPORT OF COMPUTER SOFTWA RE. IN THIS VIEW OF THE MATTER, RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL, WE ARE NOT INCLINED TO DISTURB THE FINDINGS OF THE AUTHORI TIES ON THIS ISSUE. ACCORDINGLY, GROUND NO.4 OF THE ASSESSEE IS REJECTE D. ITA NO.2995/AHD/2009 (REVENUES APPEAL) 15. IN THIS APPEAL OF THE ASSESSEE, THE FOLLOWING G ROUNDS ARE RAISED: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE O F TRAINING EXPENDITURE OF RS.30,07,991/- AND APPRENTICE WAGES OF RS.43,146/-. 1(B) THE LD. CIT(A) FAILED TO APPRECIATE THAT THE S UBSEQUENT AGREEMENT MADE IN THE MONTH OF FEBRUARY, 2003 BETWE EN THE ASSESSEE COMPANY AND FORTUNE INFOTECH USA IS SILENT ON THE I SSUE OF TRAINING EXPENSES TO BE BORN BY FORTUNE INFOTECH USA. FURTHE R, IN TERMS OF ITS SUBMISSIONS DATED 20TH, DECEMBER, 2007 WAS STATED B Y THE ASSESSEE THAT THEY ARE NOT GOVERNED BY THE PROVISIONS OF APPRENTI CES ACT, 1961. ITA NO.2734 AND 2995/AHD/2009 -7- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND I LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.21, 84,341/-. OUT OF MANAGERIAL REMUNERATION U/S. 40A(2)(B) OF THE ACT. 16. AT THE TIME OF HEARING BEFORE US, THE LEARNED C OUNSEL FOR THE ASSESSEE POINTED OUT THAT BOTH THE ABOVE ISSUES ARE COVERED BY THE DECISION OF THE ITAT IN THE CASE OF THE ASSESSEE FO R A.Y.2004-05. THE ITAT IN ITA NO.1386/AHD/2008 REJECTED THESE TWO GRO UNDS RAISED IN THE REVENUES APPEAL AND THEREFORE IN THIS YEAR ALSO SI NCE THE FACTS AND CIRCUMSTANCES ARE ALSO SIMILAR, THESE TWO GROUNDS O F THE REVENUE SHOULD ALSO BE DISMISSED. THE LEARNED DR, ON THE OTHER H AND RELIED UPON THE ORDERS OF THE AUTHORITIES. 17. AFTER HAVING HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD, WE FIND THAT THE ITAT IN A.Y.2004-05 HAS DISMISSED REVENUES APPEAL ON BOTH THE GROUNDS. THE RELEVANT FINDINGS OF THE ITAT WITH REGARD TO GROUND NO.1 WAS AS UNDER: 17. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY AND AS POINTED OUT BY THE ID . CIT(A) THERE IS NO DOUBT ABOUT THE GENUINENESS OF THE EXPENDITURE. BEFORE, 1ST FEBRUARY,2003, IN TERMS OF AN AGREEMENT DATED 15/8/ 2001, THE COST OF INITIAL TRAINING OF THE EMPLOYEES WAS BORNE BY F ORTUNE INFOTECH USA. THEREAFTER, THE SAID AGREEMENT HAS BEEN REVISE D IN FEBRUARY 2003 AND AS POINTED OUT BY THE ID. CIT(A) DURING TH E PREVIOUS YEAR THE TRAINING COST HAS TO BE BORNE BY THE ASSESSEE C OMPANY ONLY. THE BUSINESS OF MEDICAL TRANSCRIPTION CANNOT BE UND ERTAKEN BY UNTRAINED PERSONNEL AND SUCH TRAINING BEFORE REGULA R EMPLOYMENT IS AN ACCEPTED BUSINESS PRACTICE. THE EXPENDITURE H AVING BEEN INCURRED ON TRAINING OF PERSONNEL OF THE ASSESSEE C OMPANY AND ITS GENUINENESS BEING NOT IN DOUBT, APPARENTLY SUCH CLA IM IS ADMISSIBLE. IN THESE CIRCUMSTANCES, ESPECIALLY WHEN THE REVENUE DID NOT PLACE ANY MATERIAL BEFORE US SO AS TO ENABL E US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED T O INTERFERE WITH THE FINDINGS OF THE ID. CIT(A). THEREFORE, GROUND N OS.1 (A) & (B) IN THE APPEAL OF THE REVENUE ARE DISMISSED. ITA NO.2734 AND 2995/AHD/2009 -8- THE FINDING OF THE ITAT WITH REGARD TO GROUND NO.2 WAS AS UNDER: 21 . WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE AS ALSO THE AFORECITED DECISIONS RELIED UP ON BY THE ID. AR INDISPUTABLY, THE SALARY PAID TO THE DIRECTORS OF T HE COMPANY IS WITHIN THE LIMITS PRESCRIBED UNDER THE COMPANIES AC T, 1956. IN SAYAJI IRON & ENGINEERING CO.(SUPRA), IT WAS HELD T HAT ONCE THE EXPENDITURE IN QUESTION IS IN TERMS AS PROVIDED IN SECTIONS 309 AND 198 OF THE COMPANIES ACT, 1956, THERE CANNOT BE ANY NON- BUSINESS PURPOSE IN SO FAR AS THE ASSESSEE-COMPANY IS CONCERNED. IN THE CASE ABBAS WAZIR (P) LTD V. CIT 133 TAXMAN 7 02(ALL), HONBLE HIGH COURT WHILE ADJUDICATING A SIMILAR ISS UE HELD THAT IT IS NOT FOR THE INCOME-TAX AUTHORITIES TO DETERMINE WHAT WOULD BE COMMERCIALLY EXPEDIENT, AND THAT IS THE FUNCTION OF THE COMPANY OR THE FIRM. THE INCOME-TAX AUTHORITY CANNOT ORDINARIL Y INTERFERE WITH SUCH MATTERS. IT WAS OBSERVED THAT IT IS NOT FOR TH E ITO TO DECIDE WHAT WOULD BE THE CORRECT SALARY OF THE DIRECTORS O R OTHER OFFICERS OF THE COMPANY, UNLESS ON THE FACT OF IT THE SALARY FIXED IS SO EXORBITANT AND ABSURD, THAT IT CAN CLEARLY BE SAID TO BE FICTITIOUS AND AIMED AT TAX EVASION. SIMILAR VIEWS WERE EXPRES SED BY THE HONBLE JURISDICTIONAL HIGH COURT IN VOLTAMP TRANSF ORMER (P) LTD.(SUPRA). IN CIT V. SHRIRAM PISTON & RING LTD. 1 81 ITR 230 (DEL), THE HONBLE DELHI HIGH COURT HELD THE COMPAN Y LAW BOARD HAVING APPROVED THE REMUNERATION, IT COULD NOT BE S AID THAT THE EXPENDITURE INCURRED WAS EXCESSIVE OR UNREASONABLE. IN THE INSTANT CASE, THE INCOME OF THE ASSESSEE IS EXEMPT UNDER SE CTION 1OB OF THE ACT AND THE LD. CIT(A) CONCLUDED THAT THE DIRECTORS BEING FULL TIME EMPLOYEES LOOKING AFTER THE WORK OF THE ASSESSEE CO MPANY, REMUNERATION PAID IN THE RANGE OF 10 TO 12 LAKHS AN NUALLY, WAS A REASONABLE PACKAGE IN THE PREVALENT MARKET SCENARIO OF IT INDUSTRY. THE REVENUE HAVE NOT PLACED ANY MATERIAL BEFORE US IN ORDER TO CONTROVERT THE AFORESAID FINDINGS OF THE L D. CIT(A) NOR BROUGHT TO OUR NOTICE ANY CONTRARY DECISION SO AS T O ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER. IN THE ABSENCE OF ANY BASIS, WE ARE NOT INCLINED TO INTERFERE. THEREFORE, GROUND NO S.2(A) & (B) IN THE APPEAL ARE DISMISSED. ADMITTEDLY, THE FACTS AND CIRCUMSTANCES OF THE CASE FOR A.Y.2004-05 WERE SIMILAR TO THE PRESENT CASE. THEREFORE, RESPE CTFULLY FOLLOWING THE ITA NO.2734 AND 2995/AHD/2009 -9- ABOVE DECISION OF THE ITAT IN ASSESSEES OWN CASE, WE FIND NO MERIT IN THE REVENUES APPEAL, ACCORDINGLY, THE SAME IS DISM ISSED. 18. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED WHILE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 26 TH AUGUST, 2011 SD/- SD/- ( %% % %% % %% % %% % & & & & / MUKUL KR. SHRAWAT) ' ' ' ' /JUDICIAL MEMBER ( . .. . . .. . G.D. AGARWAL) !' !' !' !' /VICE-PRESIDENT PLACE : AHMEDABAD DATE : 26-08-2011 C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD