Principal Commissioner Of Income Tax-7 v. M/S Rajasthan Explosive & Chemicals Ltd

$~4 *IN THE HIGH COURT OF DELHI AT NEW DELHI+ITA 1035/2017 PRINCIPAL COMMISSIONER OF INCOME TAX-7 ..... Appellant Through:Mr.SanjayKumar,Mr.RahulChaudhary, Standing Counselversus M/S RAJASTHAN EXPLOSIVE & CHEMICALS LTD. ..... Respondent Through:Ms. Ananya Kapoor, Adv. CORAM:HON'BLE MR. JUSTICE S. RAVINDRA BHATHON'BLE MR. JUSTICE SANJEEV SACHDEVAO R D E R % 22.11.2017 The question of law sought to be urged by the Revenue underSection 260A of the Income Tax Act is where the disallowance inrespect of the Director’s remuneration, disallowance of expenditureand the corresponding taxation of the amount under Section 40A (2)(b) of the Act was justified and the cancellation of the amount broughtto tax was justified. So far as the Director’s remuneration is concerned, the Courtnotices that the AO added Rs. 72 lakhs after disallowance ofsubstantial portion of the remuneration claimed merely on the groundthat the Directors were relatives of the managing director andaccording to him were inadequately qualified. This is hardly anappeal with rationale and certainly one that can sustain disallowance which has to be based upon logical grounds. The AO appears to havemade a commercial decision as to what should be a cap applicable forsuch remuneration, and thus placing himself in the armchair of theassessee which he could not have done. Likewise, so far as thedisallowance of the expenses is concerned, the Court is of the opinionthat the method adopted i.e. a cut of 10% of the total expenditureclaimed, was not based on any reasoning. Having regard to these circumstances, the Court is of theopinion that no substantial question of law arises. The appeal is,therefore, dismissed. S. RAVINDRA BHAT, J NOVEMBER 22, 2017‘rs’ SANJEEV SACHDEVA, J