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TMI Blog2012 (11) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and in the circumstances of the case and in law, the Ld. CIT (A) erred in canceling the penalty of Rs.2,60,000/- imposed u/s.271(1)(c) of the Act for furnishing inaccurate particulars of income for the claim of excess deduction u/s. 80HHC of the Act." 3. The assessee is a company in which the public are substantially interested. It filed its return of income on 30-12-1991 declaring total income at Rs.3,78,05,010/-.The case was selected for scrutiny and thereafter assessment u/s.143(3) was completed vide order dated 17-3-1994 and the taxable income was determined at Rs.4,48,90,880/- by making various additions/disallowances to the returned income. While determining the aforesaid total income A.O. worked out deduction u/s. 80HHC of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncealed by the appellant. No income has been detected or unearthed which was not disclosed by the assessee. The addition has arisen only on account of different views having been taken as to the nature of certain items of income. This is purely a debatable matter. More than one view was clearly possible. The fact that the matter was traveled up and down a number of times right up to the Tribunal (twice) clearly indicates that the issue was a complex one, involving legal interpretation. No question of fact was involved. Accordingly, I am of the opinion that no concealment or furnishing of inaccurate particulars has been established, which would bring the case within the ambit of the provisions of section 271(1)(c). Accordingly, the penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of Sec.1 of Part-II of Schedule XIII of the Companies Act to the case of the assessee in allowing the disproportionate increase in remuneration to the Managing and Executive Directors of the assessee-company." 2. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in not appreciating the fact that the assessee has failed to produce evidence in support of their claim, like facts and figures like education, length of service and particularly their contribution in producing further business for the disproportionate increase in remuneration to their Managing and Executive Directors." Both the grounds are interconnected and therefore, disposed of together for the sake of convenience. 10. The assessee is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein that such company "may pay any remuneration, by way of salary, dearness allowance, perquisites, commission and other allowances, which shall not exceed five per cent of its net profits for one such managerial person, and if there is more than one such managerial person, ten per cent for all of them together." Section II of Part II deals with remuneration payable by companies having no profits or inadequate profits. Clause 1(A)(iii) specifies that where the effective capital of the company is Rs.5 crores or more but less than Rs.25 crores, the monthly remuneration payable shall not exceed Rs.1,25,000/-. In the instant case, the company had made profits of Rs.7.32 crores. In such a case the provisions contained in Section I of Part-II of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Ld. D.R. could not controvert the findings of CIT (A). In view of the aforesaid facts CIT (A) has given a finding that provisions of Schedule XIII of Companies Act are applicable to assessee and the assessee had made profits of Rs.7.32 crore. According to the provisions of the Schedule- XIII, the assessee could have paid remuneration to Directors upto 10% of net profits. The Ld. D.R. could not controvert the findings of CIT (A). 15. In the case of CIT vs. Shriram Pistons & Rings Ltd. (181 ITR 230 (Del.), the Hon'ble Delhi High Court has held when the Company Law Board (CLB) had approved the remuneration it could not be said that the expenditure was excessive or unreasonable. It further held that when once Company Law Board after taking ..... X X X X Extracts X X X X X X X X Extracts X X X X
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