2015 (12) TMI 1327 - AT - Income Tax

Disallowance of director s remuneration - non deduction of TDS - Held that - Original minutes of Board meeting were shown during the course of hearing wherein it was decided for increasing remuneration of director, Mr. N. C. Dalal from ₹ 20,000/- to ₹ 1,00,000/- per month w.e.f. 1.4.2007, along with ledger of director s remuneration, form no.16 for certificate u/s 203 of the Act for TDS from income chargeable under the head salaries along with proof of deposit of TDS on salary for increased amount of remuneration effective from 1.4.2007 which was paid on 22.12.2007. All these evidences have not been controverted by ld. DR. As such looking to the above facts, we are of the view that there was a genuine increase in the remuneration of the director effective from first April, 2007 and, therefore, ld. CIT(A) was not justified in upholding the action of Assessing Officer. We set aside the order of CIT(A) on this ground and delete the impugned addition - Decided in favour of assessee. Disallowance of depreciation on the good-will - Held that - As decided in assess s own case 2014 (12) TMI 1059 - ITAT AHMEDABAD it is now well settled that the goodwill is an intangible asset entitled to depreciation. The quantification of goodwill in this case seems to be reasonable. The assessee has filed a copy of working of the valuation of the goodwill as given by M/s.Anmol Sekhri & Associates, Mumbai, valuer, and a copy of which has been filed in the compilation before the Tribunal. A perusal of the said valuation report justifies the reasonableness of the valuation of the goodwill as claimed by the assessee. In these facts of the case, we hold that the claim of the assessee for depreciation on goodwill was justified - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of remuneration paid to Director
2. Disallowance of depreciation of goodwill

Analysis:
1. The appeal was against the disallowance of director's remuneration and depreciation on goodwill for the assessment year 2008-09. The Assessing Officer disallowed a portion of the director's remuneration and depreciation claimed by the assessee. The CIT(A) upheld the disallowances. The Tribunal considered the discrepancy in the effective date of the director's remuneration increase, which led to the disallowance. The Tribunal found that the original board resolution clearly mentioned the increase w.e.f. 1.4.2007, supported by relevant documents. The Tribunal concluded that the disallowance was unjustified, and the addition was deleted.

2. Regarding the disallowance of depreciation on goodwill, the Tribunal referred to a previous decision in the assessee's favor for the assessment year 2004-05. The Tribunal noted that the issue of allowing depreciation on goodwill as an intangible asset had been settled in various decisions, including the Supreme Court's ruling. The Tribunal found the valuation of goodwill reasonable and justified the claim for depreciation. Following the precedent, the Tribunal allowed the appeal on this ground as well.

In conclusion, the Tribunal allowed the appeal of the assessee, overturning the disallowances of director's remuneration and depreciation on goodwill for the assessment year 2008-09.