The Tax Publishers2021 TaxPub(DT) 0121 (Ahd-Trib)

INCOME TAX ACT, 1961

Section 143(3)

Where assessee was working as a whole time director of a company and in revised return of income he reduced his income from salary received from said company, considering fact that assessee was asked to refund the excess salary in terms of provisions of Companies Act, 1956 and the refund of the salary was not voluntary but was to comply with the legal requirement of law, therefore, addition made by AO for same was not warranted.

Assessment - Additions to income - Assessee, working as a whole time director of company, inrevised his salary - Plea of assessee that he was asked to refund the excess salary in terms of provisions of Companies Act, 1956

Assessee was working as a whole time director of company S. AO alleged that assessee reduced his income from salary in revised return of income. On query, assessee explained that he was appointed as whole-time director in the annual general meeting of the company. Since there was limit for payment of remuneration to the whole time director as per the Company Act, 1956, and accordingly, he refunded the excess amount of salary to company. AO did not agree with the submission of assessee and held that salary due, whether received or not, and also salary paid or allowed to the assessee whether due or not, was chargeable to income tax as income from salary. Held: Since there was limit for payment of remuneration to the whole time director as per the Company Act, 1956, therefore, the company has made an application to the Ministry of Corporate Affairs, Govt. of India for approving the salary of the whole time director as per the resolution passed in the annual general meeting. Central Government has approved the salary of the whole time director at a lesser amount. Assessee was asked to refund the excess salary. In the case of the assessee, Central Government decided the remuneration according to the provisions of Companies Act, 1956 and the refund of the salary was not voluntary but was to comply with the legal requirement of law. The refund was made merely with a view to comply with the provisions of Companies Act, 1956, therefore, addition was not warranted.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15



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