Income Tax Appellate Tribunal - Pune
M/S. The Alchemists Ark Private ... vs Income Tax Officer,, on 31 January, 2019
आयकर अपीलीय अिधकरण "ए" ायपीठ पुणे म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, PUNE
ी डी. क णाकरा राव,लेखा सद , एवं ी िवकास अव थी, ाियक सद के सम!
BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA No.98/PUN/2017
िनधा रण वष / Assessment Year : 2012-13
M/s. The Alchemists Ark Private Limited,
B-101, Signet Corner Building,
Baner Road, Baner,
Pune - 411 007
PAN : AABCT5190J .........अपीलाथ /Appellant
Vs.
ITO, Ward-7(5),
Pune ....... यथ / Respondent
अपीलाथ क ओर से / Appellant by : Shri Ramakrishnan
थ की ओर से / Respondent by : Shri Sanjeev Ghei
सुनवाई कतारीख / घोषणाक तारीख /
Date of Hearing : 31.01.2019 Date of Pronouncement: 31.01.2019
आदेश / ORDER
PER D. KARUNAKARA RAO, AM :
This appeal is filed by the Assessee against the order of CIT(A)-5, Pune, dated 09-09-2016 in relation to the Assessment Year 2012-13.
2. Briefly stated, relevant facts include, that the assessee is a company engaged in the business of Management Consultant. Assessee filed its return of income declaring total income of Rs.74,80,940/-. In the assessment, the AO noticed that the assessee paid Rs.24 Lakhs (Rs.12 lakhs each) to the Directors, namely Mr. Raymond Moses and Mr. Thiagarajan Sriram as variable pay. AO opined that, if the variable pay of these two directors is added, then the profit of the assessee would rise. Thus, relying on the decision of Special Bench of the Tribunal in the case of 2 ITA No.98/PUN/2017 The Alchemist Ark Pvt. Ltd., Dalal Broacha Stock Broking (P) Ltd. VS. Addl.CIT 131 ITD 36 (ITAT Mum- SB), AO disallowed the same being in the nature of dividend invoking the provisions of section 36(1)(ii). AO also made addition of Rs.2,23,975/- on account of late payment of TDS. In the First Appeal, the CIT(A) affirmed the views of the AO and dismissed the appeal of the assessee.
3. Now the assessee has approached the Tribunal raising the following effective ground :
"1. The Ld. CIT(A) erred in disallowing variable pay defined as performance bonus paid to the directors to the extent of Rs.24 lakhs."
4. Before us, at the outset, Ld. Counsel for the assessee that the issue involved in this appeal relates to the treatment of disallowance of variable pay defined as performance bonus paid to the Directors. This is a recurring issue. The Tribunal, in the assessee's own case, in the immediately preceding assessment year 2011-12 remanded the issue to the file of AO with certain directions. The AO, in the remand proceedings dated 22-11-2018, giving effect to the order of Tribunal, deleted the addition made by the AO on account of bonus paid to the Directors. A copy of the order of Tribunal order in ITA No.755/PUN/2016, dated 09-05-2018 has been placed on record. Thus, it is now a settled issue that the claim of the assessee in respect of bonus paid to the Directors is an allowable expenditure. Thus, Ld. Counsel prayed for allowing the appeal of the assessee.
5. On the other hand, Ld. DR for the Revenue relied on the orders of the AO/CIT(A).
6. We heard both the sides and perused the orders of the authorities below. We also perused the order of Tribunal in ITA No.755/PUN/2016, 3 ITA No.98/PUN/2017 The Alchemist Ark Pvt. Ltd., dated 09-05-2018 for the A.Y. 2011-12. On perusal of the same, we find the Tribunal, on similar issue, remanded the matter to the file of AO with following directions :
"10. Coming to the Special Bench decision of Mumbai Bench of the Tribunal in the case of M/s. Dalal Broacha Stock Broking Pvt. Ltd. Vs. ACIT (supra), we find the AO need to examine this aspect after comparing the facts as well as the nature of payments made to the two Directors. Further, it is the case of the assessee that his case is covered by the decisions of the Pune Bench in the case of Mahafeed Speciality Fertilizers (India) Pvt. Ltd. Vs. ACIT and in the case of Arihantam Infraprojects Pvt. Ltd. Vs. JCIT (supra). Therefore, there is a requirement of comparing the facts on the issue to that of the decisions cited by the Ld. Counsel for the assessee. We find the above decisions of the Pune Bench of the Tribunal explain the provisions relating to section 36(1)(ii) of the Act which help the AO to come to proper appreciation of legal position qua the facts of the case.
Accordingly, as discussed in open court, we are of the opinion that the request of the Ld. Counsel for the assessee for remanding the issue to the file of AO need to be considered favourably. Accordingly, we remand the issue to the file of AO. AO shall grant reasonable opportunity of being heard to the assessee in accordance with the set principles of natural justice. AO shall examine the judgmental laws and the facts on the issue and pass a speaking order. Thus, the grounds raised by the assessee are allowed for statistical purposes."
6.1 Based on the directions given by the Tribunal in the remand proceedings, the AO vide his order dated 22-11-2018, deleted the addition. For the sake of completeness, we reproduce the relevant computation made by the AO and the same reads as under :
"4. On verification of the various details that have been provided by the assessee, the assessee is hereby completed as under :
Sl.No. Particular Amount (in Rs.)
1 Income as per 143(3) dated 28/03/2014 51,64,222/-
2 Relief Allowed by CIT(A) on the issue of 4,34,133/-
Remittance to non-resident (After
verification)
Bonus paid to Director ITAT's order 30,00,000/-
dated 09/06/2018
3 Assessed Income 17,30,089/-
4
ITA No.98/PUN/2017
The Alchemist Ark Pvt. Ltd.,
6.2 From the above, it is evident that the assessee got relief in the
immediately preceding assessment year. Therefore, we direct the AO to
adopt similar reasoning and allow the claim of the assessee in the assessment year under consideration too. Thus, the assessee succeeds on this solitary issue.
7. In the result, the appeal of the assessee is allowed.
Order pronounced on this 31st day of January, 2019.
Sd/- Sd/- (िवकास अव थी /VIKAS AWASTHY) (डी. क णाकरा राव/D. KARUNAKARA RAO) ाियक सद /JUDICIAL MEMBER लेखा सद /ACCOUNTANT MEMBER
पुणे / Pune; िदनां क / Dated : 31st January, 2019 Satish आदेश क ितिलिप अ िे षत/Copy of the Order is forwarded to :
1. अपीलाथ / The Appellant;
2. यथ / The Respondent;
3. आयकर आयु (अपील) / The CIT(A)-5, Pune
4. आयकर आयु / The Pr.CIT-4, Pune
5. ए" / िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, पुणे "ए DR 'A', ITAT, Pune;
6. गाड फाईल / Guard file.
आदेशानुसार/ ार BY ORDER,स // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune.
5ITA No.98/PUN/2017
The Alchemist Ark Pvt. Ltd., Date
1. Draft dictated on 31-01-2019 Sr.PS
2. Draft placed before author 31-01-2019 Sr.PS
3. Draft proposed & placed JM before the second member
4. Draft discussed/approved JM by Second Member.
5. Approved Draft comes to Sr.PS the Sr.PS/PS
6. Kept for pronouncement on Sr.PS
7. Date of uploading order Sr.PS
8. File sent to the Bench Clerk Sr.PS
9. Date on which file goes to the Head Clerk
10. Date on which file goes to the A.R.
11. Date of dispatch of Order.