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TMI Blog2012 (10) TMI 533X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.7,57,500/- ,which it appears is on the above mentioned remuneration. 2. Short facts apropos are that assessee engaged in the business of civil, structural and engineering contracts had filed its return for impugned Assessment Year declaring income of Rs.12,15,99,651/-. During the course of assessment proceedings, it was noted by the Assessing Officer that an amount of Rs.14202391/- was claimed as payment to the Chairman and two other Directors, whereas in Form 16 issued by the assessee, the sum mentioned was Rs.75,55,140/- only. Reply of the assessee was that the remuneration payable to Chairman and its two Directors were enhanced by way of resolution passed on 2nd June, 2004, which was sent for approval of the Central Government on 21s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny provision for increase in remuneration of Directors would be void, if it was not approved by the Central Government. iv) As per Section 198(4) of the Companies Act, a company shall not pay to its directors including any managing or whole-time director or manager any remuneration except with the approval of Central Government. v) Approval of the Central Government was received only on 19.04.05. Thus, the claim was disallowed. Reliance was placed on the decision of Hon'ble Supreme Court in the case of Nonsuch Tea Estate Ltd. Vs. CIT(1975) 98 ITR 189 (SC). As per the A.O., till an approval was received from the Central Government, it was only a contingent liability. Remuneration payable being a contingent liability, question of al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crystallization of the liability on that date only. Therefore, as per CIT(A), decision of Hon'ble Apex Court in the case of Nonsuch Tea Estate Ltd. Vs. CIT (supra) squarely applied. He therefore, upheld the additions made by the Assessing Officer. 4. Now before us, Ld. A.R. strongly assailing the orders of authorities below submitted that amounts shown as payable to the whole time directors, was the remuneration due to them based on resolution passed on 2nd June,2004. The approval was received from the Central Government on 19.04.05. Accounts were finalized only on 28.04.05. Therefore, it was within the powers of the company to consider the event occuring after the balance sheet date, in accordance with AS-4 of ICAI. Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn as payable to three directors, namely Shri S.Sivaramakrishnan, Shri V.G.Janarthanam and Shri R.Sarabeswar. Ld. CIT(A) has noted this in para No.4.1.1. of his order. Approval for payment of remuneration to these persons were originally given by the Ministry of Company Affairs vide their letter dated 24.03.03 for a period of two years with effect from 15.07.02, 01.07.02 and 01.04.02. This approval expired on 14.07.04, 30.06.04 & 31.03.04 respectively. The claim of enhanced remuneration made by assessee for the impugned Assessment Year and related PF contribution has been summarized by the Assessing Officer at para 3.5 of his order. This is reproduced hereunder for brevity. "The details of remuneration are as under:- Name of Director Amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dates and not the enhanced amount only, By allowing the claim but for the enhanced part, there is a deemed acceptance that remuneration stood payable to concerned persons at least at the earlier level, if not at the increased level. So the only question that remains is whether the enhanced level of remuneration was justified? There is no finding by the Revenue that remuneration claimed by assessee was not commensurate with the service rendered by the said persons. In the case of Hon'ble Supreme Court in the case of Nonsuch Tea Estate Ltd. Vs. CIT, the question was regarding allowability of managing agency commission where it was the first appointment of managing agency. It did not relate to any enhanced remuneration at all. Having accept ..... X X X X Extracts X X X X X X X X Extracts X X X X
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