The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) in DCIT v. Garhwal Mandal Vikas Nigam Ltd, held that the honorarium paid to the Chairman of a Government Company is allowable as business expenditure under the provisions of the Income TaxAct, 1961.
The assessee is a Limited Company whose 100% equity is held by the Government of Uttarakhand. The assessee is involved in various business activities like marketing, Gas Agencies, Petrol Pumps, FL (Liquor), canteens and running Rest Houses.
While completing assessment proceedings for the relevant year, the Assessing Officer made an addition on account of expense towards honorarium paid to the Director and Chairman by observing that as the Chairman is an honorary/political post and is not of the roll of the Nigam, the expenses cannot be allowable as business expenditure.
On first appeal, the Commissioner of Income Tax (Appeals) deleted the addition and allowed the claim of the assessee. The Revenue preferred an appeal before the Tribunal against the first appellate order.
The Tribunal noticed its earlier decision wherein the case settled in favor of the assessee. In that case, the Tribunal ruled that the people working in the Chairman section have been appointed with due approval of the Board of Directors to assist the Chairman in his functioning, their salaries also had to be allowed as a regular business expenditure.
In the said order, it was also noted that the honorarium in terms of service of the Chairman of the Board of Directors is determined as per the Memorandum/Article of Association of the company, any such remuneration whether by way of salary or honorarium and other perks that the governor of Uttarakhand may deem appropriate is sanction, is to be allowed as deductible business expenditure from the accounts of the company.
Following the decision, the Tribunal dismissed the appeal by the Revenue.
Subscribe Taxscan Premium to view the Judgment
