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TMI Blog2021 (1) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... e Directors was excessive as compared to the salary being paid to similar persons with similar qualifications and experience. CIT (A), though has given partial relief to the assessee by limiting the disallowance also did not consider this aspect of the case and has reduced the disallowance in an ad hoc manner. It is also undisputed that the assessee company as well as Directors both are in the same tax bracket, which is the highest in their cases and, therefore, there can be no question of any evasion of tax by paying remuneration to the Directors. CBDT Circular No.6-P dated 6th July, 1968 clearly states that no disallowance is to be made u/s 40A (2) in respect of payments made to relatives and sister concerns where there is no attemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as an exponential increase in the Directors remuneration whereas the salaries of other employees had remained static. The assessee had debited ₹ 84,00,000/- as Directors remuneration which the Assessing Officer held to be a colorable device to siphon the profits of the assessee company. The Assessing Officer was of the opinion that the assessee could not justify the increase in the Directors remuneration. The Assessing Officer proceeded to disallow 50% of the remuneration i.e. ₹ 42 lacs and added back the same to the income of the assessee. 2.1 The assessee s appeal before the Ld. CIT (A) was partly allowed with the Ld. CIT (A) holding that 50% disallowance was excessive. He restricted the disallowance to ₹ 12,60,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quantum jump in the turnover and the net profits of the assessee company during the preceding five assessment years. The Ld. Authorized Representative submitted that the Assessing Officer had made the disallowance in an arbitrary manner without brining on record any comparable cases where the salary for similar work to people having similar qualifications was being paid at a lower rate. It was submitted that in absence of any material being brought on record to demonstrate as to how the salary paid to the Directors was excessive or was not comparable with market rates, no part of such remuneration could have been legally disallowed in terms of section 40A (2) (b). The Ld. Authorized Representative also submitted that the company as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is aspect of the case and has reduced the disallowance in an ad hoc manner. It is also undisputed that the assessee company as well as Directors both are in the same tax bracket, which is the highest in their cases and, therefore, there can be no question of any evasion of tax by paying remuneration to the Directors. The CBDT Circular No.6-P dated 6th July, 1968 clearly states that no disallowance is to be made u/s 40A (2) in respect of payments made to relatives and sister concerns where there is no attempt to evade tax. Clearly no case of evasion of tax can be made out in the present appeal. This circular is binding on the Department and since no motive to evade tax is established and further since the Assessing Officer has not pointed ou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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