NET TECH SERVICES INDIA PRIVATE LIMITED, MUMBAI v. INCOME TAX OFFICER-10(3)(1), MUMBAI

ITA 4394/MUM/2017 | 2013-2014
Pronouncement Date: 30-11-2017 | Result: Partly Allowed

Appeal Details

RSA Number 439419914 RSA 2017
Assessee PAN AABCN2023J
Bench Mumbai
Appeal Number ITA 4394/MUM/2017
Duration Of Justice 5 month(s) 15 day(s)
Appellant NET TECH SERVICES INDIA PRIVATE LIMITED, MUMBAI
Respondent INCOME TAX OFFICER-10(3)(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Partly Allowed
Bench Allotted SMC
Tribunal Order Date 30-11-2017
Last Hearing Date 09-10-2017
First Hearing Date 30-10-2017
Assessment Year 2013-2014
Appeal Filed On 14-06-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC MUMBAI BEFORE SHRI D.T. GARASIA JUDICIAL MEMBER ITA NO.4553/M/2017 ASSESSMENT YEAR: 2012-13 ITA NO.4394/M/2017 ASSESSMENT YEAR: 2013-14 M/S. NET TECH SERVICES INDIA PVT. LTD. GALA NO.24 1 ST FLOOR PREM INDUSTRIAL ESTATE SUBHASH ROAD JOGESHWARI (E) MUMBAI-400 060 PAN: AABCN 2023J VS. INCOME TAX OFFICER-10(3)(1) ROOM NO.621 AAYAKAR BHAVAN NEW MARINE LINES MUMBAI 400 020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI VIMAL PUNMIYA A.R. REVENUE BY : SMT. N. HEMALATHA D.R. DATE OF HEARING : 31.10.2017 DATE OF PRONOUNCEMENT : 30.11.2017 O R D E R PER D.T. GARASIA JUDICIAL MEMBER: THE ABOVE TITLED APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE AGAINST THE COMMON ORDER DATED 22.03.2017 OF THE CO MMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEARS 2012-13 & 2013-14. 2. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE RETURN OF INCOME WAS FILED ON 29.09.2016. DUR ING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER (HEREI NAFTER REFERRED TO AS THE AO) NOTED THAT ASSESSEE COMPANY HAD DEBITED RS.27 25 000 SHOWN AS PAYMENT ON ACCOUNT OF DIRECTORS REMUNERAT ION WHO WERE ITA NO.4553/M/2017 & ITA NO.4394/M/2017 M/S. NET TECH SERVICES INDIA PVT. LTD. 2 ACTUALLY RELATIVES OF THE EXISTING DIRECTORS AND RE MUNERATION HAD BEEN PAID TO THEM. THE AO ISSUED SHOW CAUSE NOTICE AND IN REPLY TO THE SHOW CAUSE NOTICE THE ASSESSEE SUBMITTED THAT THE I NCREASE IN THE DIRECTORS REMUNERATION IS BECAUSE OF APPOINTMENT O F TWO NEW DIRECTORS WHO LOOKED AFTER THE ADMINISTRATIVE MATTE RS OF THE OFFICE. EVEN THE NEWLY RECRUITED DIRECTORS ARE QUALIFIED PE RSONS. IN VIEW OF THE COMMERCIAL CONSIDERATION THE PAYMENT OF REMUNE RATION TO NEWLY DIRECTORS ALSO IS JUSTIFIED. THE AO DID NOT ALLOW THE REMUNERATION BUT THE LD. CIT(A) HAS ALLOWED RS.3 LAKHS PER ANNUM AS IT WAS REASONABLE REMUNERATION AND TREATED RS.4 50 000/- A S EXCESSIVE AND UNREASONABLE. THEREFORE ASSESSEE IS IN APPEAL BEF ORE ME. 3. THE LD. A.R. SUBMITTED THAT THE ASSESSEE IS A PR IVATE LIMITED COMPANY AND IS IN A BUSINESS OF SOFTWARE MAINTENANC E HARDWARE RENTING AND OTHER ALLIED ACTIVITIES RELATING TO INF ORMATION TECHNOLOGY. ASSESSEES MAIN CLIENTS ARE BANKS. ASSESSEE HAD DE CIDED TO EXPAND THE BUSINESS BY ENTERING INTO DATA ACTIVITIES. FOR COMMENCING THE NEW ACTIVITIES DIRECTORS RELATING TO MARKETING AND PERSONAL CONTACTS INVOLVED IN MEETING WITH PROSPECTS OF CLIENT. THE COMPANY DOES NOT HAVE SHAREHOLDERS FROM OUTSIDER. A SHARE COULD BE ALLOWED TO RELATIVES AND FRIENDS OF THE EMPLOYEES OF THE COMPA NY AND MRS. SABIRA DADANI IS BA GRADUATE HAVING ONE OF THE SUBJ ECTS AS THE ECONOMICS. HAVING LEARNT ECONOMICS IS THE BEST DEG REE FOR HOLDING THE POST OF DIRECTOR. MRS. NARMADA AHCAR IS MA IN H ISTORY AND SHE IS HOLDING A POST OF DIRECTOR FOR ADMINISTRATIVE PURPO SES. THE LD. A.R. ALSO SUBMITTED THAT IN THIS MODERN WORLD MANY WOMEN EMPLOYEE ARE ITA NO.4553/M/2017 & ITA NO.4394/M/2017 M/S. NET TECH SERVICES INDIA PVT. LTD. 3 DRAWING MUCH MORE SALARIES. MOREOVER THE LD. A.R. SUBMITTED THAT IN ASSESSMENT YEAR 2012-13 THE NET PROFIT HAS BEEN INCREASED FROM 10.02 TO 19.50. THEREFORE THE REMUNERATION IS JUS TIFIED. 4. THE LD. D.R. HAS RELIED UPON THE ORDER OF THE RE VENUE AUTHORITIES. 5. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LOOKING INTO THE FACTS AND CIRCUMSTANCES OF THE CASE I FIN D THAT THE ASSESSEE HAS APPOINTED NEW DIRECTORS MRS. SABIRA DADANI AND MRS. NARMADA AHCAR BOTH ARE RELATIVES OF THE MAIN DIRECTORS. I FIND THAT MRS. SABIRA DADANI IS BA WITH ECONOMICS AND ASSESSEE COMPANY HA S LARGER TURNOVER OF BUSINESS. THEREFORE TWO NEW DIRECTORS WERE APPOINTED. THE ASSESSEE COMPANY IS IN SUCH A BUSINESS THAT COM PANY NEEDS 24 HOURS. MRS. SABIRA DADANI IS BA HAVING SUBJECT OF ECONOMICS AND SHE HAS EVEN TRAVELLED TO LONDON SCHOOL OF BUSINESS AND ENHANCED HER JOB PROFILE. ASSESSEE HAS ENTERED INTO DATA CE NTRE ACTIVITIES AND FOR THAT PURPOSE PERSONAL TAX IS INVOLVED WITH PROS PECT PLANT. I FIND THAT SHE IS QUALIFIED DIRECTOR. MOREOVER MRS. NAR MADA AHCAR HAS MA WITH HISTORY AND SHE IS HOLDING THE POST AS DIRE CTOR FOR ADMINISTRATIVE PURPOSES. I FIND THAT ASSESSEES BU SINESS TURNOVER WAS INCREASED FROM RS.5.39 CRORES TO RS.8.15 CRORES FROM ASSESSMENT YEAR 2013-14 TO 2016-17 AND NET PROFIT IS ALSO INCR EASED FROM RS.10.02 TO RS.19.50 CRORES FROM A.Y. 2012-13 TO 20 16-17 WHICH ARE SHOWN IN TABLE WHICH READS AS UNDER: ASST. YEAR TURN OVER (CR) NET PROFIT (LAC) LIABILITIES ITA NO.4553/M/2017 & ITA NO.4394/M/2017 M/S. NET TECH SERVICES INDIA PVT. LTD. 4 2012-13 05.39 10.02 89 2013-14 04.04 13094 1330 2014-15 08.24 18.64 17 2015-16 07.05 14.27 11 2016-17 08.15 19.50 14 UPTO JAN- 17 09.35 NOT DETERMINED N.A. 6. I FIND THAT COMPANY GOT 60 EMPLOYEES. TO KEEP WA TCH ON 60 EMPLOYEES THE ASSESSEE HAS APPOINTED TWO NEW DIRECT ORS AND THEY ARE RELATIVES OF THE MAIN DIRECTOR. THEREFORE LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE I FIND THAT THE REMUNERA TION OF RS.7.5 LAKHS IS REASONABLE OR NOT THAT HAS TO BE SEEN AS P ER THE SERVICE OF THE DIRECTORS. I FIND THAT MRS. SABIRA DADANI IS BA GR ADUATE HAVING ONE OF THE SUBJECTS AS THE ECONOMICS. TODAY IN BUSINES S MODULE PEOPLE FROM ECONOMICS ARE PREFERRED ONE AND THEY CAN TRAVE L UP TO LONDON FOR ENHANCEMENT IN THEIR JOB PROFILE. THEREFORE S HE CAN BE HELD IN THE POST OF DIRECTOR. IN CASE OF MRS. NARMADA AHCA R SHE IS QUALIFIED DEGREE HOLDER AND SHE IS FIT FOR ADMINISTRATIVE PUR POSE. I FIND THAT TO HOLD THE POST OF DIRECTOR IT IS NOT NECESSARY THAT SHE MUST BE HAVING KNOWLEDGE IN THAT FIELD. I FIND THAT BOTH ARE COMP ETENT FOR APPOINTING NEW DIRECTORS. THE COMMISSIONER HAS ALLOWED RS.3 L AKHS EACH AS REMUNERATION IS REASONABLE BUT HE HAS SIMPLY CONSID ERED THE REMUNERATION OF ONE FEMALE EMPLOYEE ONLY. FOR RUNN ING THE BUSINESS OVERALL SITUATION HAS TO BE LOOKED INTO. THE ASSESSEE HAS PAID RS.7 50 000/- PER ANNUM TO BOTH THE DIRECTORS THAT IS ALSO NOT POSSIBLE. THEREFORE LOOKING TO THE PRESENT SCENAR IO AND BUSINESS OF THE ASSESSEE THE LADY DIRECTORS CAN LOOK AFTER THE BUSINESS IN FULL TIME. THEREFORE RS.7 LAKHS FOR EACH DIRECTOR IS R EASONABLE AS PER ITA NO.4553/M/2017 & ITA NO.4394/M/2017 M/S. NET TECH SERVICES INDIA PVT. LTD. 5 SECTION 40A(2B) OF THE ACT. HENCE I MODIFY THE OR DER OF THE COMMISSIONER. 7. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.11.2017. SD/- (D.T. GARASIA) JUDICIAL MEMB ER MUMBAI DATED: 30 11.2017. * KISHORE SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT (A) CONCERNED MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR ITAT MUMBAI.