By K. B. Bhujle, Advocate
Principal CIT vs. Future First Info Services Pvt. Ltd.
[2022] 447 ITR 299 (Del.)
A.Y.: 2009-10
Date of order: 14th July, 2022
Sections: 37, 40(a)(ia), 197(1), 201 of ITA, 1961
51. Business expenditure — Disallowance u/s 40(a) (ia) — Deduction of tax at source — Remuneration paid to the director of the assessee — Shortfall in tax deducted at source — No disallowance can be made — Proper course of action is to invoke section 201For A.Y. 2009-10, the AO made a disallowance u/s 40(a) (ia) of the Income-tax Act, 1961 on the grounds that the assessee had made a short deduction of tax on the remuneration paid to its director in violation of section 197(1).
Both the Commissioner (Appeals) and the Tribunal gave concurrent findings that the higher salary paid to the assessee’s director was accepted as remuneration by the AO during the scrutiny assessment in the subsequent assessment year and that the AO did not bring any evidence or material for making disallowance u/s 40A(2)(b) and deleted the disallowance u/s 40(a)(ia). The Tribunal upheld the decision of the Commissioner (Appeals) and held that the AO, without any reason or material facts, had arbitrarily disallowed 50 per cent of the remuneration of the director without giving cogent reasons to conclude that the remuneration paid was not commensurate with the market value of the services rendered by the director.
On appeal by the Revenue, the Delhi H
