SYNERGY (I) MARKETING P.LTD, MUMBAI V. DCIT CEN CIR 39, MUMBAI

ITA 8663/MUM/2010

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1890 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 22-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 13-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y K BHASKAR
• Assessee Lawyers: MADHUR AGARAWAL
• Keywords: Business expenditure; Search and seizure; Commercial expediency
• Section: 143(3); 153A; 37(1); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH , MUMBAI BEFORE SRI MAHAVIR SINGH, JM AND ASHWANI TANEJA , AM ITA NO . 8663 /MUM/ 201 0 (A.Y: 20 0 7 - 0 8 ) ITA NO. 8664 /MUM/ 2010 (A.Y:20 08 - 09 ) SYNERGY (INDIA) MARKETING P. LTD. 4,RAJAN HOUSE, OPP. CENTURY BAZAR, PRABHA DEVI, MUMBAI - 400025. PAN NO.AAFCS2320D VS. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 39, AAYAKAR BHAVAN, MUMBAI APPELLANT .. RESPONDENT ASSESSEE BY .. SHRI. MADHUR AGARAWAL, AR REVENUE BY .. SHRI. Y.K.BHASKAR, DR DATE OF HEARING .. 2 3 - 11 - 2016 DATE OF PRONOUNCEMENT .. 23 - 11 - 2016 O R D E R PER MAHAVIR SINGH , JM : THE S E TWO APPEAL S BY THE ASSESSEE ARE ARISING OUT OF THE ORDER OF CIT (A) - 41 , MUMBAI IN APPEAL NO S . DCCC - 39/IT.541 & 542/09 - 10 DATED 20 - 09 - 2010 . THE ASSESSMENT WAS FRAMED BY DCIT CEN TRAL CIRCLE - 39, MUMBAI FOR THE A . Y . 2007 - 08 & 2008 - 09 VIDE ORDER DATED NIL U/S 143(3) R. W. S. 153A OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). 2. THE ONLY ISSUE IN THESE APPEALS OF ASSESSEE AGAINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF D IRECTOR S REMUNERATION OF RS.36,71,698/ - IN A.Y. 2007 - 08 AND OF RS.46,92,509 IN A.Y. 2008 - 09. FOR TH IS ISSUE ASSESSEE HAS RAISED IDENTICAL WORDED GROUND S IN BOTH THE YEARS AND THE GROUND AS RAISED IN A.Y. 2007 - 08 READS AS UNDER: - 1. ON THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (A) GROSSLY ERRED IN CONFIRMING DISALLOWANCE OF DIRECTORS REMUNERATION OF RS.36,71,698/ - . 3. BRIEFLY STATED FACTS ARE THAT SEARCH AND SEIZURE ACTION WAS CARRIED OUT IN THE GROUP CASES OF VVF LTD. AND ITS GROUP OR THE COMPANIES INCLUDING SYNERGY INDIA MARKETING P. LTD., I.E. THE ASSESSEE INCLUDING ITS DIRECTOR ON 03 - 01 - 2008 BY THE DEPARTMENT U/S 132 OF THE ACT. THE FACTS ARE THAT VVF LTD. IS HAVING 50% SHARE HOLDING IN ASSESSEE COMPANY AND BALANCE 50% SHARE HOLDING IS HELD BY CONTRACTOR FAMILY I.E. MR. MINOO K. CONTRACTOR, WHO IS MANAGING DIRECTOR OF ITA NO. 8 663 & 8664 /MUM/201 0 2 SYNERGY INDIA MARKETING PVT. LTD. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICE THAT THE ASSESSEES COMPANY IS DECLARING HUGE LOSS ES YEAR AFTER YEAR BUT HAVE INCREASED DIRECTOR S SALARY ABNORMALLY. 4. THE AO OBSERVED THAT SALARY IS PAID TO DIRECTOR OF THE ASSESSEE COMPANY BELONGING TO CONTRACTOR FAMILY AND NO SALARY WAS PAID TO THE DIRECTOR OF VVF LTD. THE AO WORK OUT DETAILS OF LOSSES INCURRED AND DIRECTOR S REMUNERATION PAID FOR THE A.Y. 2002 - 03 TO 2008 - 09. THE AO ALSO NOTICED THAT THE REMUNERATION HAS BEEN INCREASED FROM 18.60 LACS IN A.Y. 2006 - 07 TO RS.55.31 LACS IN A.Y. 2007 - 08 AND TO RS.65.52 LACS IN A.Y. 2008 - 09. HE ALSO OBSERVED THAT THERE IS NO JUSTIFICATION FOR SUCH HUGE INCREASED DESPITE THE FACT THAT THE SALES HAVE INCREASED ONLY TO THE EXTENT OF RS.90.46 CRORES TO RS.91.28 CRORES. ACCORDINGLY, THE AO DISALLOWED THE EXCESS REMUNERATION PAID IN EXCESS OF RS.18.06 LACS AND THER EBY, DISALLOWED A SUM OF RS.36,71,698/ - . AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A) WHO ALSO CONFIRMED THE ACTION OF THE AO BY OBSERVING IN PARA 3.5 AS UNDER: - 3.5 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT, ORDER OF THE ASSESSING OFFICER AND. FACTS OF THE CASE CAREFULLY, IT IS. NOTICED THAT THE COMPANY IS PAYING REMUNERATION TO THE DIRECTOR BELONGING TO THE CONTRACTOR FAMILY AND NO REMUNERATION IS PAID TO ANY DIRECTOR OF VVF LTD. FROM THE DETAILS OF SALES, LOSSES AND REMUNERATION PAID TO THE DIRECTOR, IT IS NOTICED THAT FROM A.Y. 2002 - 03, THE DIRECTORS REMUNERATION WAS PAID AT RS.6.6 LACS, HOWEVER, IN AY 2008 - 09 REMUNERATION HAS BEEN PAID AT RS.65.52 LACS. DURING THE ASSESSMENT PROCEEDINGS, THE AO HAS ASKED THE ASSESSEE TO EXPLAIN THE COM MERCIAL EXPEDIENCY FOR HUGE INCREASE IN REMUNERATION OF THE DIRECTOR WHILE THE COMPANY WAS INCURRING LOSSES YEAR AFTER YEAR. IN REPLY BEFORE THE AO, THE APPELLANT HAS ADMITTED THAT THE COMPANY WAS TO INCREASE VOLUME OF SALES AND HAVE NETWORK OF RETAILS ALL OVER INDIA, SO THE COMPANY REQUIRES GOODWILL. IT IS NOT WITHIN THE SPAN OF SEVEN YEARS WHEN THE COMPANY HAS INCURRED LOSSES YEAR AFTER YEAR HOW IT WILL INCREASE GOODWILL OF THE CO. AND WHAT WAS THE COMMERCIAL EXPEDIENCY FOR INCREASING THIS SALARY. THE DEC ISION RELIED UPON BY THE APPELLANT ARE DISTINGUISHABLE TO THE FACTS OF THIS CASE HENCE NOT APPLICABLE. FROM THE FACTS OF THE CASE, IT IS NOTICED THAT THERE IS NO INCREASE IN THE EDUCATION QUALIFICATION, EXPERIENCE AND EXPERTISE OF RUNNING BUSINESS OF THE D IRECTOR AND IT HAS ALSO NOT PROVED THE COMMERCIAL EXPEDIENCY FOR HUGE INCREASE IN THE SALARY OF THE DIRECTOR WHEN THE COMPANY IS INCURRING LOSSES. KEEPING IN VIEW OF THESE FACTS, IT IS HELD THAT NO REASONABLE REPLY WAS SUBMITTED BEFORE THE AO AND BEFORE ME TO SUBSTANTIATE THE CLAIM OF THE APPELLANT, THEREFORE I AM OF THE VIEW THAT THE APPELLANT HAS FAILED TO PROVE WITH ANY DOCUMENTARY EVIDENCE, REASONS FOR HUGE INCREASE IN THE SALARY OF THE ITA NO. 8 663 & 8664 /MUM/201 0 3 DIRECTOR, THEREFORE, THE ADDITION MADE BY THE AO FOR BOTH THE YEARS ARE CONFIRMED AND GROUND OFF APPEAL IS DISMISSED. AGGRIEVED, NOW ASSESSEE IS IN SECOND APPEAL BEFORE TRIBUNAL. 5. AT THE OUTSET THE L EARNED COUNSEL FOR THE ASSESSEE FILED A COPY OF TRIBUNALS ORDER OF CO - ORDINATE BENCH IN ASSESSEES GROUP CASE WHEREIN S IMIL AR DISALLOWANCE OF DIRECTOR SALARY WAS MADE IN THE CASE OF VVF LT D. VS. DCIT IN ITA NO . 9024/MUM/2010 FOR THE A.Y. 2002 - 03 AND UP TO A.Y. 2008 - 09. THE LEARNED COUNSEL FOR THE ASSESSEE FIRST OF ALL DREW OUR ATTENTION TO THE GROUNDS RAISED BEFORE US, WHICH I S REPRODUCED IN PARA 4 OF TRIBUNAL ORDER READS AS UNDER : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (A) GROSSLY ERRED IN CONFIRMING DISALLOWANCE THE ACTION OF THE LEARNED AO OF DISALLOWING GENUINE BUSINESS EXPENDITURE IN THE FORM OF DIRECTORS SALARY OF RS.36,71,698/ - . THE LEARNED COUNSEL FOR THE ASSESSEE FINALLY TOOK US THROUGH THE FINDINGS OF TRIBUNAL GIVEN IN PARA 8 - 14 WHICH READS AS UNDER: - 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN THE INSTANT CASE, THE DISPUTE RELATES TO THE ALLOWABILITY OF SALARY PAID TO THE DIRECTOR AMOUNTING TO RS.36,00,000/ - . BEFORE WE PROCEED TO CONSIDER THE REASONS WEIGHING WITH THE ASSESSING OFFICER TO DISALLOW THE EXPENDITURE, A BRIEF BACKGROUND IS N ECESSARY. THE CONCERNED DIRECTOR, SHRI FARAZ G. JOSHI HAS BEEN EXPLAINED TO BE A WHOLE TIME DIRECTOR AND PROMOTER - DIRECTOR OF THE ASSESSEE - COMPANY SINCE 1972. IT HAS ALSO BEEN POINTED OUT THAT THE SALARY PAID TO HIM IS DULY APPROVED BY THE BOARD OF DIRECTO RS AND THAT IT IS WITHIN THE LIMITS PRESCRIBED UNDER T HE COMPANIES ACT , 1956. APART FROM THE AFORESAID, AT PAGE 105 OF PAPER BOOK, ASSESSEE HAS ENUMERATED THE NATURE OF RESPONSIBILITIES UNDERTAKEN BY TH E SAID DIRECTOR WHICH, INTER - ALIA, INCLUDES HUMAN RESOURCE MANAGEMENT - SELECTION, APPOINTMENT, ANNUAL APPRAISALS AND TRAINING OF SENIOR EMPLOYEES; HSE MANAGEMENT - ADVISING PLANT MANAGEMENT ON HEALTH, SAFETY AND ENVIRONMENT RELATED ISSUES AND THE CORPORAT E POLICY ON THE SUBJECT; NEW PROJECTS - REVIEWING AND MONITORING PROGRESS AND SPENDING; REVIEWING OF CIVIL DESIGN AND STRUCTURAL DRAWING OF NEW PROJECTS; COST OPTIMIZATION PROGRAMME - INCREASING PRODUCTIVITY AND CUTTING NON - PRODUCTIVE EXPENDITURE; AND, MEM BER OF MANAGEMENT REVIEW COMMITTEE, FINANCE COMMITTEE AND COMPENSATION COMMITTEE OF THE ACT. IT HAS ALSO BEEN EXPLAINED IN THE COURSE OF HEARING THAT SHRI FARAZ G. JOSHI IS AN ENGINEERING GRADUATE FROM IIT AND THAT HE WAS A PROMOTER - DIRECTOR OF THE COMPANY SINCE 1972. INSOFAR AS THE HISTORY OF ALLOWABILITY OF SALARY PAYMENT IS CONCERNED, IT HAS BEEN POINTED OUT THAT IN ALL THE ASSESSMENTS MADE UP TO THE DATE OF SEARCH THERE HAS BEEN NO DISALLOWANCE AND IT IS FURTHER POINTED OUT THAT FROM ASSESSMENT YEAR 200 9 - 10 ONWARDS (POST SEARCH) AND UP TO ASSESSMENT YEAR 2012 - 13, WHERE ASSESSMENTS HAVE BEEN ITA NO. 8 663 & 8664 /MUM/201 0 4 DONE U/S 143(3) OF THE ACT, NO DISALLOWANCES HAVE BEEN MADE. THE AFORESAID FACTUAL MATRIX HAS NOT BEEN CONTROVERTED BY THE INCOME - TAX AUTHORITIES AND EVEN BEFORE US, THE LD. DR HAS NOT LED ANY MATERIAL TO NEGATE THE SAME. 9. HOWEVER, AS PER THE REVENUE, IN THE COURSE OF SEARCH A STATEMENT OF SHRI FARAZ G. JOSHI WAS RECORDED WHEREIN IN AN ANSWER TO QUESTION NO. 10 IT WAS STATED THAT HE WAS NOT ATTENDING OFFICE AND NOR ANY DUTY WAS ASSIGNED TO HIM EXCEPT CONSULTATION. ON THIS BASIS, THE ASSESSING OFFICER HAS CONCLUDED THAT THE SAID DIRECTOR HAS NOT RENDERED ANY SERVICES TO THE ASSESSEE - COMPANY AND, THEREFORE, THE SALARY PAYMENT COULD NOT BE CONSIDERED AS AN EXPENDITURE I NCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. WE FIND THAT ASSESSEE HAS APPROPRIATELY EXPLAINED THE STATEMENT RENDERED BY SHRI FARAZ G. JOSHI. EVEN BEFORE US, THE LEARNED REPRESENTATIVE HAS POINTED OUT THAT THE ANSWER OF SHRI FARAZ G. JOSHI HAS TO BE UNDERSTOOD IN THE CONTEXT OF THE QUESTION RAISED. IN THIS CONTEXT, OUR ATTENTION HAS BEEN DRAWN TO THE RELEVANT PORTION OF THE STATEMENT, WHICH READS AS UNDER: - 'Q.9 WHAT IS THE NATURE OF BUSINESS CONDUCTED BY THE COMPANY I.E., M/S. VVF LTD.? A .9 THE COMPANY DEALS IN OLEO - CHEMICALS. WE ALSO WORK ON CONTRACT BASIS FOR JHONSON & JHONSON & RACKET - COLMAN. Q.10 WHO LOOKS AFTER THE DAY TO DAY ACTIVITY OF THAT COMPANY AND WHAT ARE THE DUTIES ASSIGNED TO YOU? A.10 I AM NOT AWARE ABOUT THE PERSON WH O LOOKS AFTER THE DAY TO DAY BUSINESS ACTIVITY. SINCE LAST 6 YEARS I AM NOT ATTENDING THE OFFICE NOR ANY DUTY IS ASSIGNED TO ME EXCEPT CONSULTATION.' 10. IT HAS BEEN EXPLAINED THAT THE ANSWER BY SHRI FARAZ G. JOSHI WAS IN RESPONSE TO THE QUESTION PUT TO H IM WHICH WAS AS TO WHETHER HE WAS INVOLVED IN DAY - TO - DAY MANAGEMENT OF THE COMPANY. IT WAS IN THIS CONTEXT THE ANSWER WAS MADE. SO HOWEVER, IT IS SOUGHT TO BE POINTED OUT THAT THE SAID DIRECTOR WAS RENDERING CONSULTATION AND ADVISORY SERVICES WHICH IN FACT IS THE ROLE OF A DIRECTOR. THEREFORE, IT WAS TO BE UNDERSTOOD THAT SERVICES WERE INDEED BEING RENDERED BY THE SAID DIRECTOR TO THE ASSESSEE - COMPANY. IN OUR CONSIDERED OPINION, THE OVER - EMPHASIS BY THE REVENUE ON THE WORDINGS OF THE REPLY OF SHRI FARAZ G. JOSHI HAS LED TO A WRONG CONCLUSION. WE FIND THAT BEFORE THE LOWER AUTHORITIES ASSESSEE HAD EXPLAINED THAT SHRI FARAZ G. JOSHI WAS ONE OF THE TWO MAIN DIRECTORS OF ASSESSEE - COMPANY AND THAT HISTORICALLY SUCH SALARY PAYMENTS STOOD ALLOWED AS A DEDUCTION. 1 1. IN OUR CONSIDERED OPINION, HAVING REGARD TO THE MATERIAL ON RECORD, IT IS NOT A JUSTIFIABLE INFERENCE TO REACH THAT THE SALARY PAYMENTS TO THE DIRECTOR ARE NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. IN FACT, THERE IS NO NEGATION TO THE PL EA OF ASSESSEE THAT FOR ASSESSMENT YEARS 2009 - 10 TO 2012 - 13, SUCH SALARY PAYMENTS STOOD ALLOWED AND SUCH ASSESSMENTS HAVE BEEN COMPLETED EVEN AFTER THE SEARCH CARRIED OUT ON 3.1.2008. IT IS JUDICIALLY WELL - SETTLED THAT IT IS FOR THE ASSESSEE TO DECIDE WHET HER ANY EXPENDITURE SHOULD BE INCURRED IN THE COURSE OF CARRYING ON OF ITS BUSINESS. IT IS ALSO A WELL - SETTLED ITA NO. 8 663 & 8664 /MUM/201 0 5 PROPOSITION THAT EXPENDITURE MAY BE INCURRED VOLUNTARILY AND WITHOUT ANY NECESSITY, AND SO LONG AS IT IS INCURRED FOR THE PURPOSES OF BUSINESS, S AME IS ALLOWABLE AS DEDUCTION EVEN THOUGH ASSESSEE MAY NOT BE IN A POSITION TO SHOW COMPELLING NECESSITY OF INCURRING SUCH EXPENDITURE. IN SUPPORT OF THE AFORESAID PROPOSITION, RELIANCE CAN BE PLACED ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF SASOON J. DAVID & CO. P. LTD., 118 ITR 261 (SC). 12. BEFORE PARTING, WE MAY ALSO REFER TO AN ADDITIONAL GROUND RAISED BY THE ASSESSEE ON THIS ASPECT TO CONTEND THAT THE ACTION OF ASSESSING OFFICER IN DISALLOWING THE SALARY EXPENDITURE WAS NOT WITHIN THE S COPE AND AMBIT OF SEC. 153 A OF THE ACT . SUCH PLEA HAS BEEN RAISED WITH RESPECT TO ASSESSMENT YEARS 2002 - 03 TO 2005 - 06 ON THE GROUND THAT THE ORIGINAL ASSESSMENT FOR SUCH ASSESSMENT YEARS DID NOT ABATE I N TERMS OF SECOND PROVISION TO SEC. 153A(1) OF THE ACT. AS PER THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CONTAINER WAREHOUSING CORPORATION, 279 CTR 389 (BOM.), ADDITION CAN BE MADE IN ASSESSMENT FINALIZED U/ S 153 A OF THE ACT ONLY ON BASIS OF INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH IN THE CONTEXT OF AN ASSESSMENT YEAR WHERE THE ORIGINAL ASSESSMENT DOES NOT ABATE. IT IS SOUGHT TO BE POINTED OUT THAT INSOFAR AS THE PRESENT CA SE IS CONCERNED, THE DISALLOWANCE OF SALARY PAYMENTS IS NOT BASED ON ANY INCRIMINATING MATERIAL FOUND IN THE COURSE OF SEARCH BUT BY MERELY RELYING ON THE STATEMENT OF SHRI FARAZ G. JOSHI, WHICH WOULD NOT CONSTITUTE INCRIMINATING MATERIAL FOR THE PURPOSE O F MAKING DISALLOWANCE IN AN ASSESSMENT FINALISED U/ S 153 A OF THE ACT . IN THE COURSE OF HEARING, THE LEARNED REPRESENTATIVE ALSO REFERRED TO THE FOLLOWING DECISIONS : - I) NATVAR PARIKH & CO. PVT. LTD. VS . DCIT (ITA NO. 2143, 2144, 2145/MUM/2009) (HON'BLE MUMBAI ITAT) II) JAGDISH CHANDER BAJAJ VS. ACIT (ITA NO. 109/CHD/2007) (HON'BLE CHANDIGARH ITAT) TO SAY THAT THE STATEMENT OF A PERSON RECORDED IN THE COURSE OF SEARCH CANNOT BE CONSTRUED AS AN INCRIMINAT ING MATERIAL FOUND IN THE COURSE OF SEARCH. 13. IN OUR VIEW, THOUGH THE AFORESAID ADDITIONAL GROUND RAISED BY THE ASSESSEE IS GERMANE TO THE ISSUE, SINCE WE HAVE ALREADY CONCLUDED THAT THE EXPENDITURE INCURRED BY WAY OF SALARY PAYMENTS IS ALLOWABLE EXPENDI TURE U/S 37(1) OF THE ACT, WE DO NOT FIND ANY NECESSITY TO ADJUDICATE THE SAID ADDITIONAL GROUND. 10 M/S. VVF LTD. ITA NOS.9024 TO 9030/MUM/2010 & 3588/MUM/2014 14. IN THE END, WE, THEREFORE, CONCLUDE BY HOLDING THAT THE MATERIAL AND EVIDENCE ON RECORD CLE ARLY SUGGESTS THAT SERVICES WERE RENDERED BY SHRI FARAZ G. JOSHI AS DIRECTOR OF THE ASSESSEE - COMPANY AND THAT THE SALARY PAID TO HIM CANNOT BE DISALLOWED. THEREFORE, WE SET - ASIDE THE ORDER OF CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION O F RS.36,00,000/ - . THUS, THE ASSESSEE SUCCEEDS ON THIS ASPECT. THE LEARNED COUNSEL FOR THE ASSESSEE STATED THE FACTS BEFORE US WHICH ARE EXACTLY IDENTICAL RATHER THE FACTS BEFORE US ARE BETTER THAN WHAT WAS BEFORE THE TRIBUNAL IN ITA NO. 8 663 & 8664 /MUM/201 0 6 OTHER CASE, IN WHICH THE D IRECTOR S SALARY WAS RAISED. IN THE PRESENT CASE ALSO ADMITTED FACT ARE THAT THE COMPANY IS MAKING LOSSES YEAR AFTER YEAR BUT AN IMPORTANT FACT SHOULD NOT BE LOST SIGHT OF THAT IT IS A LONG TERM STRATEGY OF THE COMPANY TO INCREASE THE VOLUME OF SALES AND H AVE A NETWORK OF OUTLETS ALL OVER INDIA, SO THAT THE COMPANY ACQUIRES GOODWILL. AT PRESENT THE COMPANY HAS 27 DEPOTS, 1500 STOCKIEST AND 9 LAKH RETAIL OUTLETS. IN HIGHLY COMPETITIVE SOAP MARKET WITH COMPETITORS SUCH AS HLL, GODREJ, WIPRO, ITC, ANCHOR, IT I S REALLY FEATHER IN THE CAP OF THE COMPANY THAT AS OF 31 ST MARCH, 2009 SALES OF 140 CRORES WAS ACHIEVED. IT WAS ARGUED THAT IN CASE IT IS DECIDED TO SELL THE COMPANY AS A RUNNING COMPANY, IN ONE STROKE, THE COMPANY WILL NOT ONLY RECOVER THE ACCUMULATED LOS SES BUT WILL ALSO EARN SUBSTANTIAL CAPITAL GAINS. IT IS FURTHER STATE D THA T THERE IS NO PROHIBITION UNDER THE INCOME - TAX OR COMPANIES ACT WHICH DOES NOT PERMIT INCREASE IN DIRECTORS REMUNERATION MERELY BECAUSE THE ASSESSEE IS MAKING LOSSES . REMUNERATION I S DETERMINED BY THE EFFORTS PUT IN BY THE DIRECTOR, FUTURE PROSPECTS OF THE COMPANY AND THEIR ABILITY TO RUN A HUGE ORGANIZATION PROVIDING EMPLOYMENT POTENTIAL TO OUR YOUNGER GENERATION AND HONING THEM IN THE ART OF MARKETING AND DISTRIBUTION. IT WAS EXPLA INED THAT MR. MINOO CONTRACTOR DIRECTOR OF THE COMPANY HAS IN - DEPTH KNOWLEDGE, EXPERIENCE AND S KILL IN THE MARKETING LINE AND H E IS THE P IVOT UNDER WHICH THE COMPANY REV OLVES. IN VIEW OF THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE REMUNERATION PAID TO THE DIRECTOR NEED NOT BE DISALLOWED . RESPECTFULLY, FOLLOWING THE ORDER OF CO - ORDINATE BENCH IN ASSESSEE S GROUP CASE , WE SET ASIDE THE ORDER OF LOWER AUTHORITIES AND ALLOW THE CLAIM OF ASSESSEE. THIS COMMON ISSUE OF BOTH THE APPEALS OF ASSESSEE IS ALLOW ED. 6. IN THE RESULT, BOTH THE APPEAL S OF THE ASSESSEE ARE ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 23 - 11 - 2016 . . SD/ - SD/ - ( ASHWANI TANEJA ) (MAHAVIR SINGH) ACCOUNTANT MEMEBR JUDICIAL MEMBER MUMBAI, DATED: 23 - 11 - 2016 SUDIP SARKAR /SR.PS ITA NO. 8 663 & 8664 /MUM/201 0 7 COPY OF THE ORDER FORWARDED TO : BY ORDER, ASSISTANT REGISTRA R ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT (A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//