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TMI Blog2010 (11) TMI 1035X X X X Extracts X X X X X X X X Extracts X X X X ..... akhs made by the AO without considering the fact that the payment made to Shri Anil Gupta, Chief Executive and father of the partner, was excessive and unreasonable as he was lacking required qualification and experience for holding this post and provisions contained in section 40A(2)(b) were clearly attracted on the facts of the case. The disallowance in assessment year 2007-08, made by the AO, amounts ₹ 6.00 lakhs, which has also been deleted by the ld. CIT(A). As the facts are similar, we proceed with the facts in the appeal for assessment year 2006-07. 2. The facts are that the return declaring loss of ₹ 12,67,574/- was filed on 31.10.2006. The assessment proceedings were initiated by issuing notices u/s 143(2) and 142( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustry. Out of total expenditure of ₹ 12,67,068/- under this head, a sum of ₹ 12.00 lakhs has been paid to him. Thus, it has been held that the salary paid to him is not commensurate with his qualification, knowledge, experience and is unreasonable having regard to the duties assigned to him. It is also mentioned that similar services can be obtained by paying salary of ₹ 25,000/- p.m. Therefore, it has been held that excessive salary was paid to him and the amount was quantified at ₹ 9.00 lakhs. The facts for assessment year 2007-08 are similar with some further elaboration. It has been mentioned that apart from Shri Anil Gupta, Mrs. Shalini Gupta and Mr. Birju were working as Receptionist and Attendant, who were p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at no evidence has been brought by the AO for coming to the conclusion that the payment of salary was excessive. Therefore, the additions made in both the years were deleted. 4. Before us, the ld. DR drew our attention towards the discussion in paragraphs nos. 4 to 6 of the assessment order and paragraph no. 5.2 of the impugned order, which has already been summarized by us. It is fairly admitted that no comparable case has been brought on record by the AO to come to the conclusion that the salary was excessive having regard to the services rendered by the employee to the assessee-firm. 5. We have considered the facts of the case and the submissions made before us. It is a fact that being the father of a partner, the provisions co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fair market value of the services rendered by Shri Anil Gupta to the assessee-firm. No comparable case has been brought on record. On the other hand, the ld. CIT(A) has clearly mentioned that the services were engaged to take care of the interest of the firm and the firm has been able to derive income of about ₹ 24.00 lakhs in these years. These findings have not been displaced by the ld. DR in any manner. Otherwise, tax has been deducted at source from the salary paid to Shri Anil Gupta and composition of his total income is such that a part of it falls within the maximum marginal rate of tax. In absence of any evidence that the fair market value of services rendered by him to the firm was less than the actual amount paid to him, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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