Mela Ram, Sirmour V. ITO, W-2, Solan

ITA 4/CHANDI/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 2029 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 01-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MANJU VERMA; KAPIL VERMA
• Keywords: TDS
• Section: 143(3); 80IC; 80IC

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “एकल सद यीय’, च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH ‘SMC’ CHANDIGARH ीमती दवा संह, या#यक सद य BEFORE: SMT. DIVA SINGH, JM आयकर अपील सं./ ITA Nos. 4&5/CHD/2020 नधा रण वष / A.Y. : 2011-12 & 2012-13 Shri Mela Ram, Prop. M/s Dewal Gram Udyog Sansthan, Village-Ogli, Kala Amb (HP). बनाम VS The ITO, Nahan. थायी लेखा सं./PAN No: ABCPR5484J अपीलाथ /Appellant यथ /Respondent नधा रती क! ओर से/Assessee by : Smt. Manju Verma, Advocate & Shri Kapil Verma राज व क! ओर से/ Revenue by : Dr. Ranjit Kaur, Sr.DR स ु नवाई क! तार&ख/Date of Hearing : 12.05.2022 उदघोषणा क! तार&ख/Date of Pronouncement : 18.05.2022 आदेश/ORDER The present appeals have been filed by the assessee assailing the correctness of the consolidated order passed by the CIT(A) Shimla dated 31.10.2019 pertaining to 2011-12 and 2012-13 assessment years. 2. In both the appeals, facts, circumstances and issues are identical. Accordingly, in view thereof, both the parties advanced identical arguments qua the similar grounds in both the appeals. In view thereof, the issues are being decided by a ITA/4&5/CHD/2020 A.Y. 2011-12& 2012-13 Page 2 of 5 common order for the sake of convenience. The grounds of appeal as raised in ITA 4/CHD/2020 are reproduced hereunder: 1 . Addition confirmed by ld. AO is arbitrary and against the law. 2. Salary given to Anil Rathi and Ritu Rathi is as per their qualification and work done by them. ld CIT(A) wrongly upheld the addition of marketing salary which is allowable under section 40 (2) (b) of the Income Tax Act. 3. The addition confirmed by CIT(A) on TDS on royality is wrong. 4. Any other ground would be taken at the time of hearing. 3. The relevant facts of the case are that the assessee is a proprieter of Dewal Gram Udhyog Sansthan which is engaged in the business of manufacturing of Mehandi, Shampoo and cosmetic products. The assessee on this stated activity has claimed deduction u/s 80IC @ 100% for the first five years and the year under consideration is the sixth year wherein the claim of deduction @ 25% was not allowed by the AO. However, in appeal it has been allowed by the CIT(A). The subject matter of dispute revolves around the fact that the salaries paid to the extent of Rs.12 lacs which constituted Rs.6 lacs each for Shri Anil Rathi and Smt. Ritu Rathi claimed at the rate of Rs.50,000/- per month to his son and daughter of the assessee for the first time in 2011-12 assessment year was questioned by the assessee. Accordingly, he reduced these and restricted it to Rs.20,000/- per month for Shri Anil Rathi and Smt. Ritu Rathi. Similarly in 2012-13 assessment year, the salary of ITA/4&5/CHD/2020 A.Y. 2011-12& 2012-13 Page 3 of 5 Rs.50,000/- was again restricted for both the son and the daughter to Rs.35,000/- each per month. 4. The assessee carried the issue in appeal before the First Appellate Authority contending that the business of the assessee has been progressively increasing over the years. Shri Anil Rathi, it was argued is BBA and Smt. Ritu Rathi is MIB. It was also argued that in 2013-14 assessment year, the AO has accepted the payment of Rs.60,000/- per month to Shri Anil Rathi and Smt. Ritu Rathi and the claim has been allowed u/s 143(3) proceedings. Accordingly, the restriction on facts was not warranted. However, the CIT(A) upheld the restriction made by the AO. 5. Aggrieved by this, the assessee is in appeal before the ITAT. 6. The ld. AR inviting attention to the submissions recorded in the impugned order itself submitted that Shri Anil Rathi, son of the assessee was BBA and Smt. Ritu Rathi was MIB. It was re-iterated that subsequently salary to the extent of Rs. 60,000/- per month has also been allowed by AO himself in 143(3) proceedings. Accordingly, it was her prayer that relief in terms of the prayer may be allowed to the assessee. ITA/4&5/CHD/2020 A.Y. 2011-12& 2012-13 Page 4 of 5 7. The ld. Sr.DR on the other hand relied upon the fact that there was a fall in the net profit of the assessee and consequently the CIT(A) has given a specific finding that 2011-12 assessment year was the first year for the assessee's son and daughter as employees of the assessee company and thus, as there was no evidence of any earlier experience, the salaries allowed were adequate. 8. The ld. AR on the other hand contended that in 2012-13 assessment year, Rs. 35,000/- per month was considered to be reasonable, atleast that salary may be considered to be reasonable in 2011-12 assessment year also. It was also argued that being son and daughter of the assessee, they would not be working for 9 to 5 hrs. and would be devoting their full attention to the family business and since this is a family concern, the in-house knowledge built over the years would be available to the assessee proprietary concern. Accordingly, it was prayed that some reasonable relief may be granted. 9. Both the parties were accordingly heard on reasonable estimates. 10. On considering the record and after hearing the parties, it is considered appropriate to modify the estimate of the AO and maintain the restriction to the extent of Rs.15,000/- per ITA/4&5/CHD/2020 A.Y. 2011-12& 2012-13 Page 5 of 5 month for Shri Anil Rathi and Smt. Ritu Rathi, son and daughter of the assessee in 2011-12 assessment year thereby considering the salary per month @ Rs.35,000/- for son and daughter as reasonable. In 2012-13 assessment year, the restriction is maintained to the extent of Rs.10,000/- per month instead of Rs15,000/- as estimated by the AO. Thereby, holding salary to the extent of Rs.40,000/- per month for Shri Anil Rathi and Smt. Ritu Rathi as a reasonable estimate. 11. Said order was pronounced in the Open Court at the time of hearing itself after hearing the parties. 12. In the result, in terms of the above, the appeals of the assessee are allowed. Order pronounced in the Open Court on 18 th May,2022. Sd/- ( दवा संह ) (DIVA SINGH) या#यक सद य/Judicial Member “प ू नम” आदेश क! त,ल-प अ.े-षत/ Copy of the order forwarded to : 1. अपीलाथ / The Appellant – 2. यथ / The Respondent -3.आयकर आय ु /त/ CIT4.आयकर आय ु /त (अपील)/ The CIT(A)5.-वभागीय त न2ध, आयकर अपील&य आ2धकरण, च4डीगढ़/ DR, ITAT, CHANDIGARH6.गाड फाईल/ Guard File आदेशान ु सार/ By order, सहायक पंजीकार/ Assistant Registrar