The Income Tax Appellate Tribunal (ITAT) Kolkata on June 6 allowed remuneration given to lady directors even though they are not involved in pure managerial or supervising work of Company.
The assessee, Betterman Engineers Pvt. Ltd., has three production units to run and four male directors remain involved in supervising production, marketing and visiting customers office, collection and procurement of raw materials etc in those units. The company has engaged four female directors for adequate surveillance and supervising of official works including for duly timely compliance with statutory obligations in running the business and therefore claimed expenses of Rs.12,80,000/- on Directors’ remuneration.
The Assessing Officer (AO) disallowed a total remuneration of Rs.6,40,000/- and added in the total income invoking the provision of section 40(A)(2) of the Act as he relied upon the statement made by another Director of the company that these lady directors are involved in organising functions, doing puja etc. and they do not come to the office regularly which do not come under the purview of business activities according to the AO. And thus observed this as a sort of a bogus expenditure and an arrangement to reduce the tax liability.
The bench consosting of Accountant member P.M. Jagpat and Judicial member Madhumita Roy partly disallowed the claims of the AO and held, “We find that even if the lady directors are not involved in pure managerial or supervising work of the assessee company their contribution to some extent cannot be brushed aside. It is indirectly accepted that to certain extent the women directors are rendering services to the benefit of the assessee company. Furthermore, taking into consideration the return of income of these lady directors it can also not be said that the income has escaped taxation. We, therefore, think it fit to allow 30% of the remuneration given to these lady directors.”
