The Principal Commissioner of Income-tax-1 v. Cytespace Research Pvt. Ltd
[Citation -2020-LL-0127-115]

Citation 2020-LL-0127-115
Appellant Name The Principal Commissioner of Income-tax-1
Respondent Name Cytespace Research Pvt. Ltd.
Court HIGH COURT OF GUJARAT AT AHMEDABAD
Relevant Act Income-tax
Date of Order 27/01/2020
Assessment Year 2013-14
Judgment View Judgment
Keyword Tags deduction of expenses • expenditure incurred • financial statement • double taxation • question of law • reasonableness of expenditure • employee benefit expenses • commercial expediency
Bot Summary: The Revenue has proposed following question of law for the consideration of this Court : Whether Appellate Tribunal has erred in law and facts in confirming the action of the CIT(A) with respect to the deletion of the disallowance made on account of employees' benefit expenses Page 1 of 4 Downloaded on : Fri Jan 31 10:46:04 IST 2020 C/TAXAP/35/2020 ORDER 3. The Tribunal while confirming the order passed by the CIT(A) and dismissing the appeal preferred by the Revenue, held as under : We find that the appellant justified that the turnover of the appellant has increased by an amount of Rs.1,10,79,362/- over the previous year which has been verified from the financial statement by the Learned CIT(A). Additionally commercial expediency/business rational of a particular expenditure incurred by an assessee for the smooth running and furtherance of its business is its prerogative and hence the same cannot be questioned by the Revenue. The question regarding tax revenue neutrality on the fact that if the income is being charged in the hands of the directors in the highest rate bracket taxing the same in the hands of the company would amount to double taxation as has been decided in the judgment of PWS Engineers Ltd.-vs-DCIT in Tax Appeal No.209 of 2015 passed by the Jurisdictional High Court has been duly taken care of by the first appellate authority. We take notice of the fact that the Tribunal relied upon the decision of the Supreme Court in the case of Sassoon J. David and Co(P) Ltd.-vs-CIT reported in 118 Page 3 of 4 Downloaded on : Fri Jan 31 10:46:04 IST 2020 C/TAXAP/35/2020 ORDER ITR, 261. We are of the view that the question as proposed by the Revenue cannot be termed as a substantial question of law. In view of the concurrent findings recorded by the two authorities, we are not inclined to justify the order passed by the Tribunal.


C/TAXAP/35/2020 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 35 of 2020 PRINCIPAL COMMISSIONER OF INCOME TAX-1 Versus CYTESPACE RESEARCH PVT. LTD. Appearance: MRS MAUNA M BHATT(174) for Appellant(s) No. 1 for Opponent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 27/01/2020 ORAL ORDER (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. This Tax Appeal under Section 260A of Income Tax Act, 1961 (for short, 'the act, 1961') is at instance of Revenue and is directed against order passed by Income Tax Appellate Tribunal, 'B' Bench, Ahmedabad dated 30th July 2019 in ITA No. 3133/Ahd/2016 for A.Y. 2013-14. 2. Revenue has proposed following question of law for consideration of this Court : Whether Appellate Tribunal has erred in law and facts in confirming action of CIT(A) with respect to deletion of disallowance made on account of employees' benefit expenses? Page 1 of 4 Downloaded on : Fri Jan 31 10:46:04 IST 2020 C/TAXAP/35/2020 ORDER 3. Tribunal while confirming order passed by CIT(A) and dismissing appeal preferred by Revenue, held as under : We find that appellant justified that turnover of appellant has increased by amount of Rs.1,10,79,362/- over previous year which has been verified from financial statement by Learned CIT(A). So far as increase of salary of employees namely Himanshu Shah being Chief Financial Officer, Mr. Suresh Ramu being Chief Executive Officer of assessee has been able to show that both employees were paid salary only for part of F.Y. 2011-12 whereas they were employed for full part of F.Y. 2012-13. payment made to Shri Lalti Pai to tune of Rs.65,00,000/- has also been justified by assessee taking into consideration his academic background and immense experience in this field. payment made to Bhavesh Acharay having 19 years of experience in clinical data management and 4 years in site management was also explained by assessee relying upon his rich qualifications and experience. All this doubts/points raised by Learned AO were carefully considered by Learned CIT(A) while deleting addition made by Learned AO. We have also carefully considered judgment relied upon by Learned AR. We find from judgment passed by Hon'ble Apex Court in Page 2 of 4 Downloaded on : Fri Jan 31 10:46:04 IST 2020 C/TAXAP/35/2020 ORDER matter of Sasson J. David and Co(PP Ltd.-vs-CIT reported in 118 ITR 261, that reasonableness of employee's expenses is not relevant to claiming deduction of expenses under section 37(1) of Act. Additionally commercial expediency/business rational of particular expenditure incurred by assessee for smooth running and furtherance of its business is its prerogative and hence same cannot be questioned by Revenue. question regarding tax revenue neutrality on fact that if income is being charged in hands of directors in highest rate bracket taxing same in hands of company would amount to double taxation as has been decided in judgment of PWS Engineers Ltd.-vs-DCIT in Tax Appeal No.209 of 2015 passed by Jurisdictional High Court has been duly taken care of by first appellate authority. Hence taking into consideration entire aspect of matter, we find no infirmity in order passed by Learned CIT(A) in deleting addition applying ration laid down by Juridical pronouncement as mentioned above so as to warrant interference. Thus, question is accordingly answered in affirmative i.e. in favour of assessee and against revenue. Consequently, appeal fails and is accordingly dismissed. 4. We take notice of fact that Tribunal relied upon decision of Supreme Court in case of Sassoon J. David and Co(P) Ltd.-vs-CIT reported in 118 Page 3 of 4 Downloaded on : Fri Jan 31 10:46:04 IST 2020 C/TAXAP/35/2020 ORDER ITR, 261. dictum as laid down by Supreme Court in Sassoon J. David (supra) is that reasonableness of employees expenses would not be relevant factor for purpose of claiming deduction of expenses under Section 37(1) of Act. It is prerogative of assessee to incur additional expenses for smooth running of his business. 5. We are of view that question as proposed by Revenue cannot be termed as substantial question of law. 6. In view of concurrent findings recorded by two authorities, we are not inclined to justify order passed by Tribunal. 7. In result, this appeal fails and is hereby dismissed. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) KUMAR ALOK Page 4 of 4 Downloaded on : Fri Jan 31 10:46:04 IST 2020 Principal Commissioner of Income-tax-1 v. Cytespace Research Pvt. Ltd
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