2011 (5) TMI 98 - HC - Income Tax

Under section 40(C) - Disallowance of Rs.3,65,000/- in respect of the payments made to five directors of the company in excess to the limit of Rs.72,000/- Held that the commission paid to the directors cannot be said to be remuneration as contemplated by section 40(c) of the Act. Re. 2008 -TMI - 32204 - DELHI HIGH COURT- Decided in favor of assessee.

Summary

Issues:
1. Disallowance of payments made to directors exceeding prescribed limit under Section 40(C).
2. Deduction of sundry credit balance written back.
3. Disallowance of building repair expenses for Holiday Home.
4. Admissibility of water charges as deduction.

Analysis:

Issue 1: Disallowance of payments made to directors exceeding prescribed limit under Section 40(C)
The court was tasked to determine if the disallowance of Rs.3,65,000 under Section 40(C) for payments made to directors above the prescribed limit of Rs.72,000 was justified. Referring to previous cases, the court ruled in favor of the assessee, indicating that a similar issue had been resolved in the assessee's favor in previous assessments. Therefore, the disallowance in this case was not upheld.

Issue 2: Deduction of sundry credit balance written back
The court addressed the question of whether a deduction of Rs.79,935 for sundry credit balance written back should be allowed. The counsel for the petitioner chose not to pursue an opinion on this matter, and the court ordered accordingly, implying no further action was required on this issue.

Issue 3: Disallowance of building repair expenses for Holiday Home
Regarding the disallowance of Rs.77,405 for building repair expenses of a Holiday Home, the counsel for the petitioner decided not to press the issue. Consequently, the court issued an order to dispose of the matter in line with the petitioner's decision.

Issue 4: Admissibility of water charges as deduction
The court examined the admissibility of water charges amounting to Rs.1,97,467 and Rs.61,816 as deductions. It was determined that these charges were not considered admissible deductions. The court did not provide further details on the rationale behind this decision, but it was part of the disposal of the reference with the orders issued accordingly.