The Income Tax Appellate Tribunal (ITAT) Delhi bench, consisting of Anil Chaturvedi, Accountant Member, and Astha Chandra, Judicial Member held that reasonableness of expenses to be judged from the angle of the businessman rather than from the angle of Assessing Officer (AO).
The assessee, Balani Infotech P. Ltd. is a company stated to be engaged in the business of dealing in the sale and purchase of e-journals. The assessee filed its return of income for Assessment Year (A.Y.) 2015-16 declaring total income at Rs.3,82,51,540/-. The case was taken up for scrutiny and thereafter assessment was framed u/s 143(3) of the Act and the total income was determined at Rs.4,08,93,800/-. Aggrieved by the order of AO, the assessee carried the matter before the Commissioner of Income Tax (CIT) who granted partial relief to the assessee. Aggrieved by the order of CIT, the assessee has preferred an appeal before the Tribunal. During the course of assessment proceedings, Assessing Officer (AO) noticed that assessee had made salary payments to Megha Balani (Daughter in Law of the Director). The assessee was asked to justify the payment of salary u/s 40(A)(2)(b) of the Act to which assessee made the submissions which were not found acceptable to AO and held the increase in salary of the Directors aggregating to Rs.16,20,000/- cannot be allowed and accordingly made its disallowance. Aggrieved by the order of AO, the assessee carried the matter before CIT. CIT upheld the order of AO. Aggrieved by the order of CIT, the assessee is before the Tribunal.
The Tribunal observed that” it is for an assessee as a businessman to come to a conclusion as to what remuneration of the salary is to be paid to the employees and the reasonableness of the expenses is to be judged from the angle of a businessman rather than from angle of an Assessing Officer.”
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