M.R PRODUCTIONS P.LTD, MUMBAI V. ITO WD 11(1)(2), MUMBAI

ITA 7182/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3127 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 09-12-2013
• Court: TRIBUNAL
• Department Lawyers: VINITA MENON
• Assessee Lawyers: RAHUL K HAKANI
• Keywords: Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/SHRI B.R. BASKARAN (AM) & RAMLAL NEGI (JM) I.T.A. NO. 7182 /MUM/ 20 13 (ASSESSMENT YEAR 200 9 - 1 0 ) M/S. M.R. PRODUCTIONS PVT. LTD. 101, MORU MILAN OPP. KHAR GYMKHANA 13 TH ROAD, KHAR WEST MUMBA I - 400 052. VS. ITO WARD 11(1)(2) AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400020. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAACM3251C ASSESSEE BY SHRI RAHUL K. HAKANI DEPARTMENT BY MS. VINITA MENON DATE OF HEARING 13 . 6. 201 6 DATE OF PRONOUNCEMENT 13 . 6 . 2 01 6 O R D E R PER B.R. BASKARAN, A M : - THE APPEAL FILED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 1.10.2013 PASSED BY LEARNED CIT(A) - 3, MUMBAI AND IT RELATES TO A.Y. 200 9 - 1 0. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LEARNED CIT(A) I N CONFIRMING THE DISALLOWANCE OF REMUNERATION PAID TO THE DIRECTORS T O THE EXTENT OF ` 4.50 LAKHS. 3. WE HAVE HEARD THE PARTIES AND PERUSE THE RECORD. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PRODUCING FILMS. THE ASSESSING OFFICER NOTICED THAT THE REMUNERATION PAID TO THE DIRECTORS HAS BEEN CLAIMED AS ` 9.60 LAKHS AS AGAINST CLAIM OF ` 5.10 LAKHS MADE IN THE IMMEDIATELY PRECEDING YEAR. SINC E THE ASSESSEE DID NOT PRODUCE B OARD RESOLUTION AUTHORISING INCREASE OF REMUNERATION AND SINCE THE SAID FA CT WAS NO T MENTIONED IN THE DIRECTORS REPORT, THE ASSESSING OFFICER CONSIDERED THE INCRE MENT OF ` 4.5 LAKHS AS M/S. M.R. PRODUCTIONS PVT. LTD. 2 EXCESS IVE IN NATURE AND ACCORDINGLY DISALLOWED THE SAME. LEARNE D CIT(A) ALSO CONFIRMED THE SAID DISALLOWANCE. 4. WE HAVE NOTICED THAT THE RE MUNERATION OF ` 9.60 LAKHS HAS BEEN PAID TO FOUR DIRECTORS AT THE RATE OF ` 2.4 LAKHS EACH. THE SAME WORKS OUT TO ` 20,000 / - PER MONTH PER DIRECTOR. AT THE TIME OF HEARING THE ASSESSEE SUBMITTED THAT ALL THE DIRECTORS ARE HAVING MORE THAN TWENTY YEARS EXP ERIENCE AND ALSO FURNISHED COPIES OF INCOME TAX RETURNS FILED BY THE DIRECTORS . A P ERUSAL OF THE SAME SHOW S THAT ALL THE FOUR DIRECTORS HAVE DULY DISCLOSED THE SALARY RECEIVED FROM THE ASSESSEE - COMPANY . WE HAVE NOTICED THAT THE TAX AUTHORITIES HAVE MADE D ISALLOWANCE ONLY FOR THE REASON THAT THERE IS N O B OARD RESOLUTION AUTHORISING THE INCREASE IN REMUNERATION. IN THIS REGARD, THE LD A.R SUBMITTED THAT THESE DIRECTORS CONSTITUTE MEMBERS OF BOARD ALSO AND THE INCREMENT HAS BEEN GIVEN WITH CONCURRENCE OF ALL. FURTHER, REMUNERATION OF ` 20,000/ - PER MONTH PER DIRECTOR, IN OUR VIEW , DOES NOT APPEAR TO BE UNREASONABLE AMOUNT , WHEN ONE TAKES INTO ACCOUNT THE EXPERIENCE OF THE DIRECTORS. FURTHER WE NOTICE THAT THE INCREMENT GIVEN TO THE DIRECTORS ALSO WORK OUT TO AROUND RS.9000/ - PER DIRECTOR PER MONTH. THE PROVISIONS OF SEC. 40A(2)(A) SHALL APPLY ONLY IF IT WAS SHOWN THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON THE RELATED PERSONS ARE EXCESSIVE OR UNREASONABLE VIS - - VIS THE FAIR MARKET VALUE OF THE SERVICES O R THE LEGITIMATE NEEDS OF THE BUSINESS. WE NOTICE THAT THE TAX AUTHORITIES HAVE NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE PAYMENT OF REMUNERATION IS EXCESSIVE VIS - - VIS FAIR MARKET VALUE OR DID NOT THEY SHOW THAT THE INCREMENT WAS NOT FOR THE LE GITIMATE NEEDS OF BUSINESS. HENCE, WE ARE UNABLE TO AGREE WITH THE DECISION TAKEN BY LEARNED CIT(A) ON THIS ISSUE AND ACCORDINGLY WE SET ASIDE THE ORDER OF LEARNED CIT(A) PASSED ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDIT I ON . M/S. M.R. PRODUCTIONS PVT. LTD. 3 5. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER HAS BEEN PRONOU NCED IN THE OPEN COURT ON 13. 6 .2016 . SD/ - SD/ - (RAMLAL NEGI ) (B.R.BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 13 / 6/ 20 1 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI PS