BRIGHT METALS INDIA P LTD, Jaipur V. ACIT, Jaipur

ITA 559/JPR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5489 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 27-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tax effect
• Section: 10B

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NO. 559/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2008-09 . BRIGHT METALS INDIA PVT. LTD., F-671, ROAD NO. 9F2, VKI AREA, JAIPUR. CUKE VS. THE ADDL. CIT, CIRCLE-1, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAACB 9670 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 602/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2008-09 . THE ADDL. CIT, CIRCLE-1, JAIPUR. CUKE VS. BRIGHT METALS INDIA PVT. LTD., F-671, ROAD NO. 9F2, VKI AREA, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAACB 9670 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY S BY : SHRI VISHNU KHANDELWAL (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI O.P. BHATEJA (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 28 .01.2016. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 5/02/2016. VKNS'K@ ORDER PER SHRI LALIET KUMAR, J.M. THESE ARE TWO CROSS APPEALS FILED BY THE ASSESSEE AND THE DEPARTMENT AGAINST THE ORDER PASSED BY LD. CIT (A)-I, JAIPUR DATED 01 .03.2013 FOR THE A.Y. 2008-09. THE GROUND RAISED BY THE ASSESSEE IS AS UNDER :- 2 ITA NO. 559 & 602/JP/2013 BRIGHT METALS INDIA P LTD. VS. ADDL.CIT THAT THE LEARNED ASSESSING OFFICER HAS SERIOUSLY ERRED IN DISALLOWING BOARD MEETING FEES EXPENSES AMOUNTING T O RS. 5,76,000/- OUT OF THE TOTAL EXPENSES INCURRED RS. 7 ,68,000/- BY WRONGLY INTERPRETING THE PROVISIONS OF SECTION 310 OF COMPANIES ACT AND RULE 10B OF THE COMPANIES (CENTRAL GOVTS) GENER AL RULES, 1956 THAT THE MAXIMUM BOARD MEETING IS RS. 10,000/- PER MEETING FOR ALL THE DIRECTORS. IT IS RESPECTFULLY SUBMITTE D THAT FIRST PROVISO TO SECTION 310 READ WITH RULE 10B CLEARLY SPECIFIES TH AT THE MAXIMUM PERMISSIBLE BOARD MEETING FEES IS RS. 10,000/- PER MEETING PER DIRECTOR. IT IS PERTINENT TO MENTION HERE THAT IN T HE INSTANT CASE BOARD MEETING FEES HAS BEEN PAID TO FOUR DIRECTORS @ RS. 8,000/- PER DIRECTOR PER MEETING, THEREFORE, WHOLE OF THE E XPENDITURE IS ALLOWABLE EXPENDITURE AND NO DISALLOWANCE CAN BE MA DE. HENCE THE ADDITIONS MADE BY THE LEARNED ASSESSING OFFICER ARE ILLEGAL & BAD IN LAW. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE CO MPANY HAS DEBITED A SUM OF RS. 7,68,000/- TO THE PROFIT & LOSS ACCOUNT ON ACCOUNT OF BOARD MEETING FEES. THE ASSESSEE HAS PAID THIS AMOUNT TO FOUR DIRECTORS OF THE COMPA NY AT RS. 1,92,000/- PER DIRECTOR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE WAS ASKED TO FURNISH THE JUSTIFICATION FOR MAKING THIS PAYMENT. IN COMPLIAN CE, THE ASSESSEE SUBMITTED THAT IN THE YEAR UNDER CONSIDERATION, 24 BOARD MEETINGS WER E HELD BY THE DIRECTORS AND THE COMPANY PAID RS. 8,000/- PER DIRECTOR PER BOARD MEE TING FEES FOR ATTENDING THE MEETING. THE AO REJECTED THE SUBMISSION OF THE AND RESTRICTED THE BOARD MEETING FEE TO RS. 5,76,000/- WITHOUT GIVING ANY COGENT REASON. 3 ITA NO. 559 & 602/JP/2013 BRIGHT METALS INDIA P LTD. VS. ADDL.CIT 3. ON APPEAL BEFORE LD. CIT (A), THE LD. CIT (A) CO NFIRMED THE ASSESSMENT ORDER BY OBSERVING AS UNDER :- I HAVE CONSIDERED THE FACTS OF THE CASE AND THE S UBMISSION MADE. FROM THE PERUSAL OF COMPANIES (CENTRAL GOVT.) GENERAL RU LES AND FORMS 1956 RULE 10B R.W.S. 10(310) IT IS CLEAR THAT THE AMOUNT OF REMUNERATION BY WAY OF FEE THAT EACH MEETING OF THE BOARD OF DIRECT ORS IS PRESCRIBED IS FOR EACH BOARD MEETING AND NOT FOR THE EACH DIRECTORS. ACTION OF THE AO IS, THEREFORE, APPROVED AND ADDITION MADE BY THE AO FOR RS. 48,000/- IS HEREBY CONFIRMED. THE GROUND OF APPEAL IS, THEREFOR E, REJECTED. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE AU THORITIES BELOW AND PERUSED THE MATERIAL AVAILABLE BEFORE US. WE ALSO FIND THA T THE JAIPUR BENCH OF THE TRIBUNAL HAS DEALT WITH THE SIMILAR ISSUE IN ASSESSEES OWN CASE IN ITA NO. 1293/JP/2008 DATED 30.01.2009. THE TRIBUNAL IN PARA 4 HAS HELD THAT T HE DIRECTORS ARE ENTITLED TO GET BOARD SITTING FEE UPTO RS. 10,000/- PER SITTING. THE RELE VANT PARA 4 IS REPRODUCED HEREUNDER :- WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE AO IN PARA 12.1 HAS OBSERVED THAT AS PER SEC. 310 THE SITTING FEE OF THE DIRECTORS CANNOT EXCEED RS. 10,000/- FOR EACH MEETING FEE AND THERE RE 12 BOARD MEETINGS DURING THE YEAR WHEREAS THE ASSESSEE HAS PAID RS. 7,000/- PER MEETING PER DIRECTOR. IT APPEA RS THAT THE AO HAS MISUNDERSTOOD THE PROVISIONS OF SECTION 310 OF THE COMPANIES ACT. HOWEVER, THE RESTRICTION ON SITTING FEE IS RS. 10,0 00/- PER DIRECTOR PER MEETING. IT APPEARS THAT THE ASSESSEE HAS NOT VIOLA TED THE PROVISIONS OF COMPANIES ACT IN MAKING THE PAYMENTS OF SITTING FEE TO THE DIRECTORS AND, THEREFORE, NO DISALLOWANCE ON THIS ACCOUNT IS CALLE D FOR. THEREFORE, THE DISALLOWANCE SUSTAINED BY THE LD CIT (A) IS DIRECTE D TO BE DELETED. THUS GROUND NO. 1 OF THE ASSESSEE IS ALLOWED. 4 ITA NO. 559 & 602/JP/2013 BRIGHT METALS INDIA P LTD. VS. ADDL.CIT THE SAID ORDER HAS NOT BEEN CHALLENGED BY THE REVEN UE, AND IN THE PRESENT CASE THE ISSUE INVOLVED IS THE SAME WHEREBY THE DIRECTORS FE E FOR 24 SITTING HAVE BEEN PAID TO FOUR DIRECTORS AMOUNTING TO RS. 7,68,000/-. HOWEVER , THE AO HAS WRONGLY ALLOWED ONLY RS. 1,92,000/-. RESPECTFULLY FOLLOWING THE COORDIN ATE BENCH ORDER IN THE ASSESSEES OWN CASE FOR EARLIER YEAR, WE HAVE NO HESITATION TO SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE DISALLOWANCE OF RS. 5,76,000/- THEREBY ALLOWING THE APPEAL OF THE ASSESSEE. REVENUES APPEAL : 6. THE GROUND RAISED IN THE REVENUES APPEAL IS AS UNDER :- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE OF T HE CASE AND IN LAW THE LD. CIT (A) IS JUSTIFIED IN DELETING THE DISALLOWAN CE OF RS. 10,71,610/- MADE BY THE A.O. 7. IT IS OBSERVED THAT THE TAX EFFECT IN THIS CASE IS LESS THAN RS. 10 LACS. WHEN THE TAX EFFECT IN THE APPEAL OF THE DEPARTMENT IS LESS THAN RS. 10 LACS, THEN THE SAME IS NOT MAINTAINABLE IN VIEW OF CBDT CIRCULAR NO. 21 OF 201 5 (F. NO. 279/MISC.142/2007-ITJ (PT.) DATED 10.12.2015. 8. AS PER SECTION 268A, NOTIFICATION REFERRED HEREI N ABOVE, IF THE TAX EFFECT IS LESS THAN RS. 10 LACS, THEN THE APPEAL OF THE DEPARTMENT IS LIABLE TO BE DISMISSED BEING NOT MAINTAINABLE/PRESSED. ACCORDINGLY THE APPEAL OF TH E REVENUE IS DISMISSED ON ACCOUNT OF TAX EFFECT BEING LESS THAN RS. 10 LACS. HOWEVER, THE DISMISSAL OF THE APPEAL WILL NOT BE TREATED AS PRECEDENT IN ANY PROCEEDINGS NOR IT W ILL BE CONSIDERED AS AN EXPRESSION 5 ITA NO. 559 & 602/JP/2013 BRIGHT METALS INDIA P LTD. VS. ADDL.CIT ON THE MERITS OF THE CASE. THE REVENUE IS FREE TO F ILE ANY OTHER APPEAL ON THE SAME ISSUE BEFORE THIS TRIBUNAL. 9. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED WHE REAS APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5/02/201 6. SD/- SD/- VH-VKJ-EHUK YFYR DQEKJ (T.R. MEENA) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 5/02/2016 DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT-M/S. BRIGHT METALS INDIA PVT LTD., JA IPUR. 2. IZR;FKHZ@ THE RESPONDENT- THE ADDL.CIT, CIRCLE-1, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 559 & 602/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR 6 ITA NO. 559 & 602/JP/2013 BRIGHT METALS INDIA P LTD. VS. ADDL.CIT