M/s Ratlam Wires Pvt. Ltd., Ratlam V. The Addl. CIT, Ratlam

ITA 729/IND/2013

• Counselvise Citation: 72922714 RSA 2013
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 16-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: P D NAGAR
• Keywords: Depreciation

Judgement Text

RATLAM WIRES PVT. LTD ITA NOS.729 & 730/IND/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER AND SHRI B.C. MEENA, HONBLE ACCOUNTANT MEMBER ITA NOS. 729 & 730/IND/2013 A.YS.2007-08 & 2008-09 RATLAM WIRES PVT. LTD. RATLAM PAN AABCR-8178G ::: APPELLANT VS ADDL. COMMR. OF INCOME TAX RATLAM ::: RESPONDENT APPELLANT BY SHRI P.D. NAGAR RESPONDENT BY SHRI R.A. VERMA DATE OF HEARING 9.9.2015 DATE OF PRONOUNCEMENT 1 6 . 9.2015 O R D E R PER SHRI B.C. MEENA, AM THESE APPEALS FILED BY THE ASSESSEE EMANATE FROM THE COMMON ORDER OF THE LEARNED CIT(A), UJJAIN, DATED 23.10.2013. THE ASSESSEE IS ENGAGED IN MANUFACTURING RATLAM WIRES PVT. LTD ITA NOS.729 & 730/IND/2013 2 STEEL WIRES. FOUR PRIVATE LIMITED COMPANIES OF THE ASS ESSEE HAVING INDUSTRIAL UNITS WERE BEING MANAGED BY FIVE FAMIL IES HEADED BY FIVE BROTHERS AND THEIR SONS. THE DETAILS OF REMUNERATION PAID EITHER AS AN EMPLOYEE OR IN THE CAPACIT Y OF DIRECTOR IN THE ASSESSMENT YEARS 2007-08 AND 2008-0 9 ARE AS UNDER :- ASSESSMENT YEAR 2007 - 08 ASSESSMENT YEAR 2008 - 09 REMUNERATION PAID RS. ALLOWED BY A.O. RS. REMUNERATION PAID RS. ALLOWED BY A.O. RS. 19,20,000 11,25,000 21,28,500 14,05,000 9,48,000 6,60,000 13,20,000 8,25,000 15,25,000 4,65,000 NIL NIL 2. BEFORE US IT WAS CLAIMED THAT THE REMUNERATION PAID TO THE DIRECTORS WAS SUITABLY INCREASED BY THE COMPANY LOOKING TO THEIR EXPERIENCE AND DEVOTION TO THE WOR K. THE ASSESSING OFFICER HELD THE REMUNERATION EXCESSIVE ON THE BASIS THAT THE TURNOVER OF THE COMPANY IS NOT INCREASED AS COMPARED TO THE INCREASE IN THE REMUNERATION IN THESE RATLAM WIRES PVT. LTD ITA NOS.729 & 730/IND/2013 3 YEARS AND THERE WERE ONLY TWO DIRECTORS IN THE ASSESSM ENT YEAR 2008-09 AND THERE WAS NET LOSS AS PER THE RETURN. 3. THE ONLY ISSUE INVOLVED IN THESE APPEALS RELATES T O DISALLOWANCE OF REMUNERATION PAID TO THE DIRECTORS OF T HE COMPANY. 4. WE HAVE HEARD BOTH THE SIDES. AN IDENTICAL ISSUE ON IDENTICAL FACTS HAS COME UP BEFORE US IN THE CASE OF M/ S KATARIA WIRES PRIVATE LIMITED, BEING ITA NOS. 731 AND 732/IND/2013 WHEREIN AFTER ELABORATE DISCUSSION, WE HA VE ALLOWED THE CLAIM OF THE ASSESSEE. THE RELEVANT FINDI NG OF THE HON'BLE TRIBUNAL IS AS UNDER :- 4. WE HAVE HEARD BOTH THE SIDES. AFTER HEARING, WE FIND THAT THE REMUNERATION PAID BY THE ASSESSEE WAS WELL WITHIN THE PERMISSIBLE LIMIT UNDER SCHEDULE XIV OF THE COMPANIES ACT. RATLAM WIRES PVT. LTD ITA NOS.729 & 730/IND/2013 4 FURTHER, THERE WAS INCREASE IN THE PROFITABILITY OF THE COMPANY. HOWEVER, THE NET LOSS WAS DUE TO INVESTMENT IN WIND MILLS AND CLAIMING DEPRECIATION THEREON AT 80%. THE ASSESSEE HAS PAID TAX UNDER MAT. THE REMUNERATION PAID TO THE DIRECTORS WAS APPROVED BY THE BOARD OF DIRECTORS AND SHAREHOLDERS IN THE ANNUAL GENERAL BODY MEETING. IT IS ALSO FOUND THAT THE DIRECTORS ARE PAYING TAX AT THE HIGHEST MAXIMUM MARGINAL LIMIT, THEREFORE, THERE APPEARS TO BE NO EVASION OF TAX THROUGH THIS PAYMENT AND REMUNERATION TO DIRECTORS. 5. IN VIEW OF THE ABOVE FACTS, THE ASSESSEES CASE IS FIT IN THE CLARIFICATION ISSUED BY CBDT WHE N PROVISIONS WERE INSERTED IN THE INCOME TAX ACT FOR HOLDING SO. WE ALSO GET SUPPORT FROM THE FOLLOWING DECISIONS :- RATLAM WIRES PVT. LTD ITA NOS.729 & 730/IND/2013 5 (I)CIT VS. INDO SAUDI SERVICES (TRAVEL) P.LTD.; ( 2009) 310 ITR 306(BOM) (II) CIT VS. EDWARD KEVENTER (P) LTD. (1972) 86 ITR 370 (CAL) (III) CALCUTTA ART STUDIOS (PVT.) LTD.VS.CIT; 11 8 ITR 572(CAL) (IV) KASHIPRASAD CARPETS(P)LTD.VS. CIT; 148 I TR 710(ALL) (V) NEWTON STUDIOS LTD. VS.CIT; 28 ITR 378 (MA D.) 6. KEEPING IN VIEW THE ABOVE DISCUSSION, WE ALLOW BOTH THE APPEALS OF THE ASSESSEE. 5. SINCE THE FACTS AND ISSUE INVOLVED IN THE PRESENT APPEALS ARE IDENTICAL, WE, FOLLOWING THE REASONINGS GIVE N BY THE HON'BLE TRIBUNAL (SUPRA), HOLD THAT THE AUTHORITIE S BELOW WERE NOT JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE. WE, THEREFORE, ALLOW BOTH THE APPEALS OF THE ASSESSEE. RATLAM WIRES PVT. LTD ITA NOS.729 & 730/IND/2013 6 6. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ST AND ALLOWED. PRONOUNCED IN OPEN COURT ON 16 TH SEPTEMBER, 2015 SD SD (D.T. GARASIA) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER 16 TH SEPTEMBER, 2015 DN/-