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TMI Blog2017 (10) TMI 1248X X X X Extracts X X X X X X X X Extracts X X X X ..... its business smoothly and therefore, was a deductible expenditure. Thus, the impugned order of the Tribunal is essentially a finding of fact. The respondents have not been able to show that these findings are in any manner perverse or arbitrary. Disallowance on payment of assessee’s contribution to PF/ESIC made beyond due date of the respective statutes - Held that:- The payments are within due date of filing of return on income under section 139(1) of the Act and once, the payments are within the due date of filing under section 139 of the Act, the payments are to be allowed as deduction. Revenue appeal dismissed. - ITA No. 143/ Mum/ 2016 - - - Dated:- 27-10-2017 - Sri Mahavir Singh, JM And Sri G. Manjunatha, AM, JJ. Revenue by : Ram Tiwari, DR Assessee by : Sauravh V. Bhat , A R ORDER Per Mahavir Singh, JM This appeal by the Revenue is arising out of the order of Commissioner of Income Tax (Appeals)-9, Mumbai, [in short CIT(A)] in appeal No. CIT(A)-9/Cir.4/359/2014-15, dated 27-10-2015. The Assessments were framed by the Additional Commissioner of Income Tax, Circle-4(3), Mumbai (in short ACIT or AO) for the assessment year 2012-13 vide order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal has made the following observations on page 4 of the order: 7. We have considered the rival submissions. A perusal of the impugned order of the Ld. CIT(A) reveals that the amount of salary plus commission paid to the directors has not been held to be excessive by the lower authorities. There is no denial of the fact that the amount paid was reasonable in comparison to the remuneration paid for the services in the market. There is no denial of the fact that the dividend of ₹ 3 crore was declared in the year under consideration. There seems merit in the contention of the ld. AR that the company has 29 shareholders and 4 directors whereas the commission was paid to two working directors only. So far the reliance of the Ld. D.R. on the special bench decision of the Tribunal in the case of Dalal Broacha Stock Broking P. Ltd. v. Addl. CIT (supra) is concerned, we find that the facts of the present case are quite distinguishable. In the said case there were only three shareholders who were directors of the company and no dividend was declared and there was no explanation as to why the dividend was not declared. Under such circumstances, we find force in the contention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om salary to director and the said commission is paid within the prescribed limit under companies Act 1956. We find that this commission has been consistently been paid to the working directors as part of their salary structure which comprises of basis salary and contribution to provident fund, superannuation contribution and commission as explained by the learned Counsel for the assessee. The logic behind the payment of commission is to bring accountability among the higher management and to ensure that in the event of profitability of the company is reduced, the directors shall be the first person to be affected by way of their payment of lower emoluments. This commission is subject to limit prescribed under the companies Act at the rate of 5% of any profits. We find that both the working directors are well qualified and look after general administration, Finance apart from research activity also production and marketing. Both the directors attained the following achievements a. Since 1970, one of the director was member of Research advisory committee, Central institute of Aromatic and Medicinal plants (CIMAP) Lucknow, a Government of India Research Institute. b. Invite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. AY 2008-09 and 2009-10 also disallowed the said legal expenses. The CIT(A) after considering the decision of Hon ble Bombay High Court in the case of CIT vs Chemosyn Ltd., Mumbai in ITA No. 361 of 2013 and also considering the judgement of Hon ble Supreme Court in the case of CIT vs. Malayalam Plantations Ltd. [1964] 53 ITR 140 (SC) allowed the claim of the assessee by observing in Paras. 5.4.1 to 5.4.3 as under: - 5.4.1 I have considered the contention of the AO as well as of the AR of the appellant. I find that the issue is again identical to the one raised in AY 2008- 09 and AY 2009-10. The learned AR has pointed out that the issue as earlier dismissed by the Hon ble ITAT, Mumbai for AY 2008-09 but was later recalled following the order of the Hon ble Bombay High Court in the case of CIT vs. /Chemsyn Ltd.(supra) The Hon ble ITAT, Mumbai in its order against the Miscellaneous Application filed for AY 2008-09 vide order dated 13.03.2015 has staed as under: 5 ..so far as the disallowance of legal expenditure in relation to dispute between the directions of the company is concerned, in view of the law laid down by the Hon ble Bombay High Court in the case of CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -condition to commence or for carrying on of a business; In view of the above observations and judicial pronouncement and due to the order of the Hon ble ITAT, Mumbai in the appellant s own case during AY 2008-09, I delete the disallowance made by AO. 8. We find from the above facts that the facts are not in dispute only legality of legal expenses are challenged by the Revenue. We find that this issue is settled by Hon ble Bombay High Court in the case of Chemosyn Ltd (supra), wherein it is held as under: - 11. We find that the impugned order records a finding of fact that the amounts which were paid by the respondent assessee for the purpose of purchase of its shares, to its shareholder for subsequent cancellation was an expenditure incurred only to enable smooth running of the business. Thus, the expenditure was incurred for carrying on its business smoothly and therefore, was a deductible expenditure. Thus, the impugned order of the Tribunal is essentially a finding of fact. The respondents have not been able to show that these findings are in any manner perverse or arbitrary. Therefore, questions nos. 3 to 5 do not give arise to any substantial question of law. Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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