ACIT, New Delhi v. M/s. Sigma Corporation India Pvt. Ltd., New Delhi

ITA 3887/DEL/2010 | 2007-2008
Pronouncement Date: 29-02-2012 | Result: Dismissed

Appeal Details

RSA Number 388720114 RSA 2010
Assessee PAN AABCS8026L
Bench Delhi
Appeal Number ITA 3887/DEL/2010
Duration Of Justice 1 year(s) 6 month(s) 11 day(s)
Appellant ACIT, New Delhi
Respondent M/s. Sigma Corporation India Pvt. Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 29-02-2012
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 29-02-2012
Date Of Final Hearing 22-02-2012
Next Hearing Date 22-02-2012
Assessment Year 2007-2008
Appeal Filed On 17-08-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G : NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI B.C. MEENA ACCOUNTANT MEMBER ITA NO.3691/DEL/2010 ASSESSMENT YEAR : 2007-08 SIGMA CORPORATION INDIA LTD. R-561 SHANKAR ROAD NEW RAJINDER NAGAR NEW DELHI. PAN : AABCS8026L VS. DCIT CIRCLE 8 (1) NEW DELHI. ITA NO.3887/DEL/2010 ASSESSMENT YEAR : 2007-08 ACIT CIRCLE 8 (1) NEW DELHI. VS. SIGMA CORPORATION INDIA LTD. R-561 SHANKAR ROAD NEW RAJINDER NAGAR NEW DELHI. PAN : AABCS8026L (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI BALJIT SINGH CA REVENUE BY : SHRI D.K. MISHRA CIT DR ORDER PER I.P. BANSAL JUDICIAL MEMBER THESE ARE CROSS APPEALS. THEY ARE DIRECTED AGAINST THE ORDER PASSED BY THE CIT (A) DATED 28 TH MAY 2010 FOR ASSESSMENT YEAR 2007- 08. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURI NG AND EXPORT OF AUTOMOBILE RUBBER PARTS AND IT DECLARED IT S INCOME AT ` 40 99 191/-. THE ASSESSMENT HAS BEEN FRAMED VIDE ORDER DATED 20 TH NOVEMBER 2009 AT AN INCOME OF ` 1 32 51 080/- IN W HICH VARIOUS ITA NO.3691/DEL/2010 ITA NO.3887/DEL/2010 2 DISALLOWANCES AGGREGATING TO ` 91 51 887/- HAVE BEEN MADE THE DETAILS OF WHICH ARE AS UNDER:- A) EXCESSIVE PAYMENT OF RENT U/S 40A(2)(B) 13 12 40 0/- B) DIRECTOR SALARY 13 04 160/- C) INTEREST FREE LOANS 60 27 919/- D) DISALLOWANCE U/S 14A 3 63 280/- E) DISALLOW. U/S 2 (24)(X) 1 44 191/- 2. ALL OF THE ABOVE DISALLOWANCES WERE SUBJECT MATTER OF APPEAL BEFORE THE LEARNED CIT (A). LEARNED CIT (A) HAS SUSTA INED THE DISALLOWANCES IN RESPECT OF INTEREST FREE LOANS AND DISAL LOWANCE U/S 14A. THE ASSESSEE IS AGGRIEVED BY SUSTENANCE OF THESE DISAL LOWANCES AND OTHER DISALLOWANCES HAVE BEEN DELETED BY LEARNED CIT (A) BY WHICH THE REVENUE IS AGGRIEVED. THE GROUNDS OF APPEAL RAISE D BY BOTH THE PARTIES IN THEIR APPEALS ARE AS UNDER:- ASSESSEES APPEAL (ITA NO.3691/DEL/2010) 1. THE LD. CIT (A) ERRED ON FACTS AND IN LAW IN SUS TAINING THE ACTION OF THE LD. A.O. MAKING DISALLOWANCE OF INTEREST TO THE TUNE OF RS.60 27 919/- ON ACCOUNT OF AMOUNTS GIVEN TO SUBSI DIARIES & SISTER CONCERN. 2. THE LD. CIT (A) ERRED ON FACTS AND IN LAW IN SUSTA INING THE ACTION OF THE LD. A.O. MAKING DISALLOWANCE U/S 14A OF THE INCOME TAX ACT TO THE TUNE OF RS.3 63 280/-. REVENUES APPEAL (ITA NO.3887/DEL/2010) 1. LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE I N DELETING THE ADDITION OF RS.13 12 400/- MADE BY THE A.O . BEING EXCESSIVE PAYMENT OF RENT U/S 40A(2)(B) OF THE ACT. ITA NO.3691/DEL/2010 ITA NO.3887/DEL/2010 3 2. LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE I N DELETING THE ADDITION OF RS.13 04 160/- MADE BY THE A.O . ON ACCOUNT OF DIRECTORS SALARY. 3. LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE I N DELETING THE ADDITION OF RS.1 44 128/- MADE BY THE A.O. BEING BELATED PAYMENT OF EMPLOYEES CONTRIBUTION OF PF U/S 36 (1)(VA) READ WITH SECTION 2 (24)(X) OF THE IT ACT. 4. THE APPELLANT CRAVES TO AMEND MODIFY ALTER ADD OR FOREGO ANY GROUND OF APPEAL AT ANY TIME BEFORE OR DUR ING THE HEARING OF THIS APPEAL. 3. REFERRING TO THE ASSESSEES APPEAL IT WAS SUBMITTED BY THE LEARNED AR THAT GROUND NO.1 HAS TO GO BACK AS THE SAME IS COVERED BY THE EARLIER DECISIONS OF THE TRIBUNAL. HE IN THIS REG ARD REFERRED TO THE DECISION OF THE TRIBUNAL DATED 26 TH MARCH 2010 COPY OF WHICH IS PLACED AT PAGES 28 TO 43 OF THE PAPER BOOK. IT IS IN RESPECT OF ASSESSMENT YEAR 2005-06 IN ITA NO.2616/DEL/2008. THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL READ AS UNDER:- 2.2 IN GROUND NO.2 THE REVENUE HAS CHALLE NGED THE ACTION OF LD. CIT(A) IN DELETING THE DISALLOWANCE OF INTERESTS IN RESPECT OF THE LOAN TO THE SUBSIDIARY COMPANY. IT WAS TH E SUBMISSION BY THE LD. D.R. THATS THE LD. CIT(A) HAS FOLLOWED THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF S A BUILDERS AND COMPANY REPORTED IN 288 ITR 01 (S.C.). IT WAS THE FURTHER SUBMISSION THAT BEFORE THE CIT(A) THE ASSESSEE H AD PRODUCED VARIOUS EVIDENCES IN THE FORM OF A CHART SHO WING THE SUMMARY OF THE BANK BORROWINGS AND UTILIZATION THERE OF. IT WAS THE SUBMISSION THAT THESE EVIDENCES HAD NOT BEEN PRODUCED BEFORE THE A.O. IT WAS THE SUBMISSION THA T THE CIT(A) HAD ALSO NOT SENT THE DETAIL TO THE A.O. FOR V ERIFICATION. IT WAS THE SUBMISSION THAT THIS ISSUE NEEDS TO BE RESTORED TO THE FILE OF THE A.O. FOR RE-ADJUDICATION. 2.2.1 IN REPLY THE LD. A.R. SUBMITTED THAT NO DETAIL S HAD BEEN CALLED FOR BY THE A.O. AND THE A.O. HAD ONLY REFERRED CASE LAWS TO MAKE THE DISALLOWANCE. IT WAS THE SUBM ISSION THAT THE ORDER OF CIT(A) ON THIS ISSUE WAS LIABLE TO BE UPHELD AS IT WAS SQUARELY COVERED BY THE DECISION OF HON' BLE SUPREME COURT IN THE CASE OF S A BUILDERS REFERRED TO SUPR A. ITA NO.3691/DEL/2010 ITA NO.3887/DEL/2010 4 2.2.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS . IT IS FOUND THAT THE ASSESSEE HAS PRODUCED VARIOUS EVIDENCES BEFORE THE CIT(A). IT IS ALSO NOTICED THAT SUCH EVIDENCES WE RE NOT BEFORE THE A.O. IT IS UNDISPUTED THAT THE A.O. HAS RAISED THE ISSUE OF INTEREST FREE LOAN BEING GIVEN TO THE SUB SIDIARY COMPANY. IN SUCH A SITUATION IT IS OBVIOUSLY THE DUTY OF THE ASSESSEE TO PRODUCE ALL SUCH EVIDENCES TO SUBSTANTIATE ITS CASE BEFORE THE A.O. IT WAS NOT INCUMBENT UPON THE A.O. TO DEMAND THE ASSESSEE TO PRODUCE ALL SUCH EVIDENC ES AS IS FAVORABLE TO THE ASSESSEE. THE A.O. NORMALLY RAI SES THE ISSUE WHERE HE SUSPECTS THAT CERTAIN DISALLOWANCES IS CALLED FOR OR THE INCOME IS LIABLE TO BE ASSESSED. IT IS THE DUTY OF THE ASSESSEE TO PRODUCE THE EVIDENCES TO SUBS TANTIATE ITS CASE. AS IT IS NOTICED THAT THE EVIDENCES H AVE BEEN PRODUCED BEFORE THE CIT(A) THOUGH IN THE FORM OF A CHART AND THE SAME HAS NOT BEEN PRODUCED BEFORE THE A.O. WE ARE OF THE VIEW THAT THIS ISSUE SHOULD BE RESTOR ED TO THE FILE OF THE A.O. FOR RE-ADJUDICATION. IT IS ALSO DIRECTED TH AT IF THE ASSESSEE IS ABLE TO SHOW THAT THE ASSESSEES CASE DOE S FALL WITHIN THE PARAMETERS AS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF S A BUILDERS REFERRED TO SUPRA NO DISALLOWANCE OF INTEREST SHALL BE MADE BY THE A.O. IN THESE CIRCUMSTANCES THE APPEAL OF THE REVENUE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. 4. REFERRING TO THE AFOREMENTIONED OBSERVATIONS OF TH E TRIBUNAL IT WAS SUBMITTED BY THE LEARNED AR THAT THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF ASSESSING OFFICER. HE ALSO SUBMITTED THAT FACTS AND CIRCUMSTANCES OF THE CASE FOR THE PRESENT YEAR ARE ALSO SIMILAR. 5. ON THE OTHER HAND THE LEARNED DR RELIED UPON TH E ORDER OF THE ASSESSING OFFICER AND CIT (A). 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. THE ASSESSEE HAS MADE ADVA NCES TO ITS GROUP COMPANIES AS WELL AS 100% SUBSIDIARIES THE NAMES OF WHICH ARE LISTED IN PARA 5 OF THE IMPUGNED ASSESSMENT ORDER. THE AGGREGATE AMOUNT ADVANCED BY THE ASSESSEE IS A SUM OF ` 11 00 44 35 0/- THE DETAILS OF WHICH ARE AS UNDER:- ITA NO.3691/DEL/2010 ITA NO.3887/DEL/2010 5 S.NO. NAME OF THE PERSON AMOUNT OF RENT 1 M/S SIGMA INDS. LTD. 7 39 40 468/- 2 M/S SIGMA MOULDS & STAMPINGS PVT. LTD. 2 29 73 281/- 3. M/S SIGMA GLOBAL INC. 35 93 356/- 4. M/S RIGHT GUARD RUBBER PVT. LTD. 81 83 208/- 5. M/S RIGHT GUARD ROLLER & CASTERS PVT. LTD. 12 50 510 /- 6. M/S SIGMA VIBRACOUSTIC PVT. LTD. 40 573/- 7. M/S AUTOMOTIVE MATERIALS PVT. LTD. 29 139/- 8. M/S AVTAR AGENCIES PVT. LTD. 28 206/- 9. M/S APM CONSTRUCTIONS PVT. LTD. 51 000/- TOTAL 11 00 44 350/- 7. THE FACTS OF THIS YEAR ARE STATED TO BE SIMILAR WITH THE FACTS OF THE AFOREMENTIONED ASSESSMENT YEAR 2005-06. TO RETAIN CONSI STENCY AFTER HEARING BOTH THE PARTIES WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO RE-ADJUDICATE THE SAME AS PER THE DI RECTIONS GIVEN BY THE TRIBUNAL IN RESPECT OF ASSESSMENT YEAR 2005-06. THIS GROUND SHALL BE CONSIDERED TO BE ALLOWED FOR STATISTICAL PURPO SES. 8. SO AS IT RELATES TO GROUND NO.2 IT IS THE SUBMISSION OF THE LEARNED AR THAT THE DISALLOWANCE HAS BEEN CALCULATED ON THE BASIS OF RULE 8D WHICH HAS NOW BEEN HELD TO BE NOT APPLICABLE TO ASSESSMENT YEAR 2007-08. HE IN THIS REGARD REFERRED TO THE DEC ISION OF HONBLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD . VS. CIT (2011) 203 TAXMAN 364 (DELHI). IT WAS SUBMITTED BY THE LEAR NED AR THAT THE MATTER IN THIS REGARD ALSO SHOULD BE RESTORED BACK TO T HE FILE OF ASSESSING OFFICER WITH A DIRECTION TO RE-ADJUDICATE THE SAME IN THE LIGHT OF THE AFOREMENTIONED DECISION OF THE DELHI HIGH COU RT. 9. ON THE OTHER HAND THE LEARNED DR RELIED UPON TH E ORDER OF ASSESSING OFFICER AND CIT (A). ITA NO.3691/DEL/2010 ITA NO.3887/DEL/2010 6 10. AFTER HEARING BOTH THE PARTIES ACCEPTING THE RE QUEST OF THE LD. COUNSEL OF THE ASSESSEE FOR RESTORATION OF THIS ISSUE TO THE FILE OF ASSESSING OFFICER WE RESTORE THE SAME TO THE FILE OF ASSE SSING OFFICER WITH A DIRECTION TO RE-ADJUDICATE THE DISALLOWANCE I N ACCORDANCE WITH THE AFOREMENTIONED DECISION OF HONBLE DELHI HIGH CO URT. THIS GROUND IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 11. NOW COMING TO THE DEPARTMENTAL APPEAL GROUND NO.1 IS STATED TO BE COVERED BY THE EARLIER ORDERS OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. FIRST REFERENCE IS MADE TO THE DECISION OF THE TRIBUNAL DATED 30 TH OCTOBER 2009 FOR ASSESSMENT YEAR 2004-05 AND ASSESSMENT Y EAR 2003-04 WHEREIN SIMILAR DISALLOWANCES WERE MADE FOR A SUM OF ` 46 12 745/- AND ` 37 36 000/- UNDER THE PROVISIONS OF SECTION 40A (2)(B) OF THE ACT IN RESPECT OF RENT PAID BY THE ASSESSE E FOR PROPERTIES TAKEN ON RENT FROM THE DIRECTORS AND THEIR RELATIVES AND THE TRIBUNAL HAD DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE WITH THE FOLLOWING OBSERVATIONS:- 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND GONE THROUGH THE RECORD CAREFULLY. AS FAR AS THE FACTS NOTICE D BY US THERE IS NO DISPUTE. THE PERSONS TO WHOM RENT WAS PAID COME WITHIN THE AMBIT OF SEC. 40A(2). SECTION 40A(2) HAS A D IRECT BEARING ON THE CONTROVERSY IN HAND THEREFORE IT IS SA LUTARY UPON US TO TAKE NOTE OF THIS SECTION. IT READS AS UNDER: SECTION 40A(2) READS AS UNDER: (2)(A) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON REFERRED TO IN CLAUSE (B) OF THIS SUB- SECTION AND THE [ASSESSING] OFFICER IS OF OPINION TH AT OFFICER IS OF OPINION THAT OFFICER IS OF OPINION THAT OFFICER IS OF OPINION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVIN G SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVIN G SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVIN G SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVIN G REGARD TO THE FAIR MARKET VALUE OF THE GOODS SERVI REGARD TO THE FAIR MARKET VALUE OF THE GOODS SERVI REGARD TO THE FAIR MARKET VALUE OF THE GOODS SERVI REGARD TO THE FAIR MARKET VALUE OF THE GOODS SERVI CES CES CES CES OR FACILITIES OR FACILITIES OR FACILITIES 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 THEREFROM SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED AS A DEDUCTION. ITA NO.3691/DEL/2010 ITA NO.3887/DEL/2010 7 10. ON BARE PERUSAL OF THIS CLAUSE IT WOULD INDICATE THAT THE OPINION OF THE ASSESSING OFFICER AS TO WHETHER ANY EXP ENDITURE IS EXCESSIVE OR UNREASONABLE HAS TO BE IN COMPARISON TO THE FAIR MARKET VALUE OF THE GOODS OR FACILITY. IN OTHER WORDS ASSESSING OFFICER HAS TO ESTABLISH WHETHER SUCH SERVICES GOODS OR FACILITY CAN BE AVAILED BY AN ASSESSEE FROM THE OPEN MARKET ON A LOWER RATE. IN CASE THE ASSESSING OFFICER IS ABLE TO DEMONS TRATE THAT SUCH FACILITIES ARE AVAILABLE AT A LESSOR PRICE IN THE OPEN MARKET THEN HE WOULD BE ABLE TO ARGUE THAT PRICE PAID BY THE AS SESSEE IS EXCESSIVE OR UNREASONABLE. THE ASSESSING OFFICER THUS WAS REQUIRED TO MAKE SOME INQUIRY OR INVESTIGATE THE ISSUE. ON PERUSAL OF THE ASSESSMENT ORDER IT REVEALS THAT ASSESSI NG OFFICER HAS NOWHERE CONDUCTED SUCH INQUIRY. HE ONLY MADE COM PARISON OF THE RENT PAID BY THE ASSESSEE IN EARLIER YEARS VIS- -VIS THESE ASSESSMENT YEARS. THE CIRCUMSTANCES POINTED OUT BY THE ASSESSEE HAVE TOTALLY BEEN OVERLOOKED. IT WAS CONTENDED BY THE ASSESSEE THAT ADDITIONAL SPACE HAS BEEN TAKEN ON RENT AT VASANT VIHAR. THE RATE OF RENT WAS LOWER IN THE EARLIER YEARS BECAUSE CONSTRUCTION COST WAS BORN BY THE COMPANY AND SUCH AMOU NTS HAVE BEEN CONSIDERED AS A DEPOSIT MADE BY THE TENANT TO THE LANDLORD. THE MOMENT LANDLORD HAS REPAID SUCH DEPOSI T OR REIMBURSED THE COST OF CONSTRUCTION THEN RENT WAS REQUIRE D TO BE CHARGED BY THE LANDLORD AT MARKET RATE. THE ASSESSEE HA S NOT TAKEN THE BUILDING ON ASSETS SIDE IN THE COMPANYS ACCO UNT. SIMILARLY IT HAS NOT CLAIMED DEPRECIATION ON THE BUILD ING. WITHOUT LOOKING TO ALL THESE FACTS ASSESSING OFFICER HA S MADE THE DISALLOWANCE. TAKING INTO CONSIDERATION ALL THESE F ACTS AND CIRCUMSTANCES AND THE DETAILED DISCUSSION MADE BY THE L EARNED CIT(APPEALS) WE DO NOT FIND ANY REASON TO INTERFERE I N THE ORDER OF THE LEARNED FIRST APPELLATE AUTHORITY. THE APPEALS OF THE REVENUE ARE DISMISSED. 11. IN THE RESULT BOTH THE APPEALS FILED BY THE REVENUE ARE DISMISSED. 12. COPY OF THE AFOREMENTIONED ORDER IS PLACED AT PA GES 20-26 OF THE PAPER BOOK. THE AFOREMENTIONED DECISION OF THE TRIB UNAL WAS LATER ON FOLLOWED IN RESPECT OF ASSESSMENT YEARS 2005-06 AND 2006- 07 VIDE AFOREMENTIONED ORDER DATED 26 TH MARCH 2010. THEREFORE IN THIS VIEW OF THE DECISION AFTER HEARING BOTH THE PARTIES RESP ECTFULLY FOLLOWING THE AFOREMENTIONED ORDER OF THE TRIBUNAL WE FIND N O MERIT IN THE GROUND TAKEN BY THE REVENUE AND THEREFORE THE SAME IS DISMISSED. ITA NO.3691/DEL/2010 ITA NO.3887/DEL/2010 8 13. APROPOS GROUND NO.2 THIS GROUND IS ALSO STATED TO B E COVERED BY THE AFOREMENTIONED DECISION OF THE TRIBUNAL DATED 26 TH MARCH 2010 WHEREIN THE TRIBUNAL HAS DEALT WITH THIS GROUND AS UND ER:- 4.3 IN GROUND NO.3 THE ASSESSEE HAS CHALLENGED THE ACTION OF CIT(A) IN SUSTAINING THE DISALLOWANCE MADE BY THE A.O. OF THE SALARY PAID TO TWO DIRECTORS BY INVOKING THE PROVISI ONS OF SECTION 40A(2)(B) OF THE ACT. IT WAS THE SUBMISSION BY THE LD. A.R. THAT NO COMPARATIVE CASE HAD BEEN SHOWN BY THE A.O. IT WAS THE SUBMISSION THAT THE A.O. HAS TRIED TO DRA W AN INFERENCE THAT THE SALARY OF ANOTHER EMPLOYEE WHO WAS A N EMPLOYEE DIRECTOR IN THE ASSESSEE COMPANY HAD NOT I NCREASED AT THE SAME RATE AS THAT OF TWO DIRECTORS OF THE ASSESSEE COMPANY WHO WERE FAMILY MEMBERS AND WHO WERE SUBSTAN TIAL SHAREHOLDERS IN THE ASSESSEE COMPANY. IT WAS THE SUBMI SSION THAT THAT SUCH A COMPARISON COULD NOT BE DONE AS THE WORK OF EACH EMPLOYEE IS DIFFERENT AND THE RATE OF INCREASE IN SALARY OF EACH EMPLOYEE WOULD NOT BE IDENTICAL. IT WAS THE FURTHER SUBMISSION THAT THE PROVISIONS OF SECTION 40A(2)(B) SPECIFICALLY REQUIRES THE A.O. TO MAKE THE DISAL LOWANCE ONLY IF HE IS OF THE OPINION THAT THE EXPENDITURE WAS EXCESSIVE AND UNREASONABLE HAVING REGARD TO THE FAIR MARKET VA LUE OF THE GOODS SERVICES AND FACILITIES FOR THE PAYMENT IS MADE. IT WAS THE SUBMISSION THAT THE A.O. HAS NOT SHOWN A NY COMPARATIVE FAIR MARKET VALUE AND CONSEQUENTLY N O DISALLOWANCE COULD BE MADE. 4.3.1 IN REPLY THE LD. D.R. VEHEMENTLY SUPPORTED THE ORDER OF THE A.O. AND THE CIT(A). THE LD. D.R. REITERATED THE STAND OF THE A.O. IN THE ASSESSMENT ORDER. IT WAS THE SUB MISSION THAT THE SALARY OF TWO OF THE DIRECTORS WHO WERE F AMILY MEMBERS HAVE BEEN INCREASED SUBSTANTIALLY WHEREAS THE SALARY OF A DIRECTOR WHO WAS NOT A FAMILY MEMBER DID NO T INCREASE AT THE SAME RATE. IT WAS THE SUBMISSION THAT THE ORDER OF THE A.O. AND THE CIT(A) WAS LIABLE TO BE UPHELD. 4.3.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A P ERUSAL OF THE PROVISIONS OF SECTION 40A(2) CLEARLY SHOWS THAT IT I S ONLY IF THE A.O. IS OF THE OPINION THAT THE PAYMENT CONCE RNED IS EXCESSIVE AND UNREASONABLE WHEN COMPARED WITH THE FAIR MARKET VALUE OF THE SERVICES AND GOODS THE A.O. CAN M AKE THE DISALLOWANCE. THUS WHAT IS PRIMA FACIE REQUIRED IS A COMPARISON WITH ANOTHER CASE TO SHOW THE FAIR MA RKET VALUE. JUT BECAUSE TWO DIRECTORS WHO MAY BE FAMIL Y MEMBERS ARE GIVEN HIGHER INCREASE IN SALARY WHEN COMPAR ED TO ANOTHER DIRECTOR WHO IS NOT A FAMILY MEMBER IT CAN NOT BE SAID THAT THE FAIR MARKETS VALUE OF THE SERVICES SHOUL D BE THAT AS PAID TO THE DIRECTOR WHO HAS RECEIVED THE LOWE R INCREASE IN THE SALARY. WHEN A CONCERN IS RUN BY FAMI LY MEMBER THE ITA NO.3691/DEL/2010 ITA NO.3887/DEL/2010 9 RESPONSIBILITY ON THE DIRECTORS WHO ARE FAMILY M EMBERS WILL OBVIOUSLY BE MUCH HIGHER WITH THAT AS THE COMPANY ITSEL F IS THE SOURCE OF EARNING FOR THE DIRECTOR. A DIRECTOR WH O IS FAMILY MEMBER WHO HAS CONTROL OVER THE COMPANY IF THE COMP ANY FAILS WOULD NORMALLY NOT GET EMPLOYMENT EASILY AS IT WOULD BE A BLACK MARK IN HIS RESUME THAT HE WAS UNA BLE TO RUN THE COMPANY WHICH WAS DOING WELL. BUT AN EMPLOYEE D IRECTOR CAN AT ANY POINT OF TIME RESIGNS FROM THE COMPAN Y AND WALK AWAY. FURTHER THE NATURE OF WORK OF EACH DIRECTOR WOULD BE DIFFERENT IN SO FAR AS ONE MAY BE IN CHARGE OF SALES ANOTHER IN CHARGE OF MANUFACTURING AND ANOTHER IN CHAR GE OF HUMAN RESOURCES. THE SALARY OF ALL WILL NOT BE THE SAME. THE COMPARISON IF MADE SHOULD BE OF IDENTICAL OR NE AR IDENTICAL AT LEAST IN THE NATURE OF WORK AND OF AN OUTSIDER. IN THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE COMPARISON AS MADE BY THE A.O. OF AN EMPLOYEE DIRECTOR DOES NOT GIVE A FAIR MARKET VALUE THE SERVICES RENDERED BY THE OTHER TW O DIRECTORS WHOSE SALARY HAS BEEN DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. IN TH ESE CIRCUMSTANCES THE DISALLOWANCE AS CONFIRMED BY THE CIT(A) ON THIS ISSUE STAND DELETED AND THE APPEAL OF THE ASSESS EE IN I.T.A. NO. 4052/DEL/2009 IS PARTLY ALLOWED FOR STATIS TICAL PURPOSE. 14 IN THIS VIEW OF THE SITUATION AFTER HEARING BOTH THE PARTIES AS FACTS AND CIRCUMSTANCES ARE SAME RESPECTFULLY FOLLOWING THE AFOREMENTIONED ORDER WE FIND NO SUBSTANCE IN THE GRO UND TAKEN BY THE REVENUE WHICH IS DISMISSED. 15. APROPOS GROUND NO.3 IT IS FOUND THAT THIS DISALLOW ANCE WAS MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE CO NTRIBUTION OF PF OF ` 74 281/- AND ` 69 847/- WERE DUE TO BE PAID ON 20 TH SEPTEMBER 2006 AND 20 TH FEBRUARY 2007 WHICH WAS PAID BY THE ASSESSEE ON 6 TH OCTOBER 2006 AND 24 TH FEBRUARY 2007 RESPECTIVELY AND THUS REFERRING TO THE PROVISIONS OF SECTION 2 (24) (X) THE ASSESSING OF FICER HELD THAT THESE PAYMENTS ARE NOT ALLOWABLE U/S 36 (1) (VA) UNLESS THESE ARE DEPOSITED WITHIN THE TIME ALLOWED UNDER PF ACT. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. SINCE THE PAYMENTS HAVE BEEN MADE IN THE ACCOUNTING YEAR ITSELF WE DO NOT SEE ANY JUSTIFICATIO N IN SUSTENANCE OF SUCH DISALLOWANCE AS THE SAME HAS BEEN DELETED BY THE CI T (A) ON THE BASIS OF HONBLE DELHI HIGH COURT (JURISDICTIONAL HIGH COURT) IN THE CASE ITA NO.3691/DEL/2010 ITA NO.3887/DEL/2010 10 OF CIT VS. AIMIL LTD. IN ITA NO.1063/2008 DATED 23 RD DECEMBER 2009. THEREFORE THIS GROUND OF THE REVENUE IS DISMISSED. 16. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID AND THE APP EAL FILED BY THE REVENUE IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 29.02.20 12. SD/- SD/- [B.C. MEENA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 29.02.2012. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES