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TMI Blog2023 (1) TMI 570X X X X Extracts X X X X X X X X Extracts X X X X ..... e have been preferred against separate orders dated 21.07.2022 and 24.08.2022 passed by the Ld. Commissioner Income-tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi (in short 'the Ld. CIT(A)'] for assessment years 2018-19; 2015-16 2016-17 respectively. 2. The issue raised in these appeals are permeating from same set of facts and circumstances and therefore, same were heard together and disposed off by way of this common order for convenience and avoid repetition of facts. 2.1. We take up the appeal of the assessee in ITA No. 2375/M/2022 for assessment year 2018-19 as the lead case. The grounds raised by the assessee for assessment year 2018-19 are reproduced as under: 1. Violation of Principles of Natural Justice That on the facts and circumstances of the case and in law, the National Faceless Appeal Centre (NFAC) has erred in passing an ex-parte order without giving the Appellant an opportunity of being heard which is in violation of Principles of Natural Justice i.e., Audi Alteram Partem. 2. Addition under section 56 (2)(viib) of the Income-tax Act, 1961(Act) That on the facts and circumstances of the case and in law, the NFAC ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant's group company's case. 3.4. That on the facts and circumstances of the case and in law, the NFAC has erred in confirming the addition under section 40A(2)(b) of the Act of the Act to the tune of Rs. 2,98,20,988/- without appreciating that there is no profit requirement under section 37 of the Act for paying remuneration to its directors/KMPs. 3.5. That on the facts and circumstances of the case and in law, the addition of Rs. 2,98,20,988/- confirmed by the CIT(A)(NFAC) may be directed to be deleted. 3. At the outset, the Ld. Counsel of the assessee submitted that the Ld. CIT(A) has not considered the submission of the assessee and order has been passed ex-parte, therefore, matter may be remitted back to the Ld. CIT(A) for deciding the order afresh after taking into consideration submission of the assessee. 4. The Ld. Departmental Representative (DR) did not object seriously to the prayer of the Ld. Counsel of the assessee. 5. We have heard rival submissions and perused the relevant material on record. We find that the Ld. CIT(A) while adjudicating the grounds raised by the assessee on the issue of addition u/s. 56(2)(viia) amounting to ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The relevant portion of the judgement is reproduced below: Whether in the circumstances of the case, the sum of Rs. 37,733 paid to the General Manager Shri J.P. Vaish, which has been disallowed by the income-tax Appellate Tribunal was an amount laid out or expended wholly or exclusively for the purpose of the business of the assessee? J.K. Woollen Manufacturers vs Commissioner of Income-Tax, U.P on 2 August, 1968 By its judgment, dated May 22, 1962, the High Court answered the question against the assessee. Against the judgment of the High Court the present appeal is brought by special leave Section 10(2)(x) and 10(2)(xv) of the Income Tax Act, 1922 at the relevant time read as follows: 10(2) (x): any sum paid to an employee as bonus or commission for services rendered, where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commission: Provided that the amount of the bonus or commission is of a reasonable amount with reference to- (a) the pay of the/employee and the conditions of his service; (b) the profits of the business. profession or vocation for the year in question; and (e) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As per the submission, in compliance to notice u/s. 142(1) of the I.T. Act, 1961 that, it appears that the assessee company has allotted 9089380 nos. of equity shares of the assessee company with a face value of Rs. 10/- and premium thereon of Rs. 14.86/- per share and reported received of Rs. 22,59,61,988/- being the share capital with premium thereon 9089380. As per the submission regarding valuation certificate dated 12.10.2017 prepared by Shreya Thareja Co., valuing the Fair Market Value of the shares is Rs. 24.42 per equity share under the DCF valuation method. Therefore, allotment of 9089380 nos. of equity shares of the assessee company over and above its Fair Market Value by Rs. 0.44=(Rs. 24.86-Rs. 24.42) and the excess consideration of Rs. 39,99,327 =(9089380 X 0.44) received by the assessee company as share application is added back to the total income u/s. 56(2)(viib) of the Income Tax Act, 1961. 8.2 Section 56 (2) (viib) of the Act states as follows:- (viib) where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him there from, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction: Provided that the provisions of this section shall not apply in the case of an assessee being a company in respect of any expenditure to which sub-clause (i) of clause (c) of section 40 applies. (b) The persons referred to in clause (a) are the following, namely:- (ai) any individual who has a substantial interest in the business or profession of the assessee, or any relative of such individual; (iv) a company, firm, association of persons or Hindu undivided family having a substantial interest in the business or profession of the assessee or any director, partner or member of such company, firm, association or family, or any relative of such director, partner or member, ; (v) a company, firm, association of persons or Hindu undivided family of which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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