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Venubhai Enterprises Pvt. Ltd., New ... vs Department Of Income Tax cites

Voltamp Transformers P. Ltd. vs Commissioner Of Income-Tax, Gujarat-I on 9 October, 1980

6.5 It will be seen that she was paid inter alia a salary @ Rs.2.25 lac per month and commission at the rate of 5% of the net profit of the company. She was also entitled to suitable accommodation, failing which she was entitled to house rent allowance at the rate of 1.50 lac per month. She was entitled to other facilities such as gas, electricity, water and furnishing, medical expenses for self and the family in any part of the world, Chauffeur driven car for official duties, a mobile, a telephone at residence, and reimbursement of entertainment of expenses incurred in the course of business of the company etc. 6.6 Coming to the legal position in respect of the provision, the Hon'ble Gujarat High Court in the case of Voltamp Transformers (P) Ltd. Vs. CIT, (1981) 129 ITR 105, held that the legitimate business needs of an assessee or the benefit derived by or accruing to the assessee from goods, services, facilities etc. are to be judged from the point of view of the businessman and not from the point of view of the revenue officer. In this case, it was also held that in judging the reasonableness or excessiveness of a particular payment, one must keep in mind the relevant considerations.
Gujarat High Court Cites 9 - Cited by 44 - S B Majmudar - Full Document

Upper India Publishing House (P) Ltd. vs Commissioner Of Income Tax, Lucknow on 4 December, 1978

Hon'ble Supreme Court in the case of Upper India Publishing House (P) Ltd. Vs. CIT (1979) 117 ITR 569, held that the question whether a particular payment is excessive or unreasonable is essentially a question of fact. We have mentioned the aforesaid 6 decisions on our own as none of the contending parties had cited any case law in the matter to support its case, and thus, it became necessary for us to have a look at the position of law in the matter. The position is that the question is essentially a question of fact, and the same should be decided from the point of view of the businessman and not from the point of view of the revenue officer. It is also a fact that the remuneration paid to Ms. Neerien Nina Kaur Gill, was not approved by the Company Law Board under the Company Act and, therefore, it cannot be presumed that it was reasonable. 6.7 It is a matter of fact on record that the remuneration was increased from Rs.15.90 lac to Rs.61.94 lac in one year. The only objective criterion cited before us for working out reasonable remuneration was by the revenue, and it was based on the ratio of turn over of last year and this year. In the light of position in the case of Voltamp Transformers (P) Ltd., the situation has to be looked not only on the basis of statistics but also from the point of view of a businessman. It is a fact, not denied by revenue, that Ms. Neerien Nina Kaur Gill, was associated with the operations of the company from the very beginning and took important jobs including sales were looked after by her. The resolution of the Board of Directors did not mention the basis on which her remuneration was fixed. We find that no comparable case of any other employee has been cited by the assessee as such a case may not exist looking to these factors we are of the view that the phenomenal increase of about 3.95 times may not justified looking to the fair market value of the services rendered by the director or legitimate needs of the business of the assessee or 7 benefit derived therefrom. Therefore, the invocation of the provision contained in section 40A(2) was justified on the facts and in the circumstances of the case. We, however, find that the learned CIT (A) did not take into account the relevant factor such as fair market value of the services, legitimate needs of the business of the assessee or benefit accruing to the assessee into account while fixing arm's length remuneration at Rs.31.80 lac. He summarily stated that the Assessing Officer shall allow the remuneration of Rs.31.80 lac, being twice the amount paid in the last year. In absence of detailed discussion on the factors which prompted the learned CIT (A) to fix arm's length remuneration as aforesaid, we think it fit to restore the matter to his file with a direction to consider relevant factors and decide the issue afresh after hearing both the parties. Thus, ground no. 2 of the revenue and ground No. 1 of the assessee are treated as allowed for statistical purposes. (Emphasis own)
Supreme Court of India Cites 2 - Cited by 58 - Full Document
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