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M/s. VLCC Health Care (P) Ltd. M 14, Commercial Complex Greater Kailash Part II, New Delhi Vs. Addl.CIT, Range 17, New Delhi.
February, 11th 2021

IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH ‘G’ : NEW DELHI)

BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER
and

SHRI KULDIP SINGH, JUDICIAL MEMBER

(THROUGH VIDEO CONFERENCE)

ITA No.1960/Del./2017
(ASSESSMENT YEAR : 2010-11)

M/s. VLCC Health Care (P) Ltd., vs. Addl.CIT, Range 17,
M – 14, Commercial Complex, New Delhi.
Greater Kailash Part – II,
New Delhi – 110 048.

(PAN : AAACC4808P)

(APPELLANT) (RESPONDENT)

ASSESSEE BY : Shri V.K. Bindal, CA
Ms. Sweety Kothari, CA
Ms. Rinky Sharma, CA

REVENUE BY : Shri Prakash Dubey, Senior DR

Date of Hearing : 03.02.2021
Date of Order : 10.02.2021

O R D E R

PER KULDIP SINGH, JUDICIAL MEMBER :

Appellant, M/s. VLCC Health Care (P) Ltd. (hereinafter

referred to as ‘the assessee’) by filing the present appeal sought to set

aside the impugned order dated 25.01.2017 passed by the Commissioner

of Income-tax (Appeals)-9, New Delhi qua the assessment year 2010-11

on the ground that :-
2 ITA No.1960/Del./2017

“ The CIT (A) erred in law and on facts in confirming the
disallowance of an amount ofRs.6,73,933/- being 35% of the
remuneration paid to Ms. Pallavi Luthra, daughter of the director of
the assessee, u/s 40A(2)(b) of the Act merely on surmises ignoring the
facts and evidences placed on record regarding her qualification and
responsibilities undertaken by her in the business of the assessee.
Thus the disallowance so made should be deleted.”

2. Briefly stated the facts necessary for adjudication of the
controversy at hand are : The assessee has challenged the
confirmation of disallowance of an amount of Rs.6,73,933/- being 35%
of the remuneration paid to Ms. Pallavi Luthura, one of the director of
the assessee, under section 40A(2)(b) of the Income-tax Act, 1961 (for
short ‘the Act’) on the ground that Assessing Officer (AO) has ignored
the facts and evidences brought on record by the assessee qua
qualification and responsibility undertaken by Ms. Pallavi Luthura in the
business of the assessee.
3. Assessee carried the matter before the ld. CIT (A) by way of
filing the appeal who has confirmed the addition made by the AO by
partly allowing the appeal. Feeling aggrieved by the order passed by the
ld. CIT (A), the assessee has come up before the Tribunal by way of
filing the present appeal.

4. We have heard the ld. Authorized Representatives of the

parties to the appeal, gone through the documents relied upon and

orders passed by the revenue authorities below in the light of the

facts and circumstances of the case.

5. Undisputedly, AO/CIT(A) while disallowing the amount of
Rs.6,73,933/- being 35% of the remuneration paid to Ms. Pallavi
3 ITA No.1960/Del./2017

Luthura have not disputed qualifications and duties/responsibilities
assigned to Ms. Pallavi Luthura by the assessee company. It is also not
in dispute that no comparable case vis-à-vis assessee has been taken to
examine the functional profile of Ms. Pallavi Luthura while disallowing
35% of the remuneration paid to her.
6. When we examine para 4.1 of the impugned order passed by the
ld. CIT (A) which is the submissions made by the assessee highlighting
qualifications and work assigned to her, it is surprising to note that the
Revenue has accepted working of Ms. Pallavi Luthura as a Director and
allowed 65% of the amount paid to her but it is beyond comprehension
as to how they had reached the conclusion that out of the 100% of the
work assigned to Ms. Pallavi Luthura by the assessee company, 35% of
the same was found ingenuine. The entire disallowance is on the basis
of conjectures and surmises.
7. AO also brought on record the fact that Ms. Pallavi Luthura was
Director having 50% of the shareholding in another company called
Cloud Cuckoo Farm during the year under assessment but assessee
stated that Cloud Cuckoo Farm’s profit is nil and brought on record its
balance sheet in additional evidence. Again, it is surprising to disallow
35% of the remuneration, particularly when genuineness of the job
profile has not been questioned, merely on the ground that Ms. Pallavi
Luthura was a Director in Cloud Cuckoo Farm. It is also a matter of fact
on record that Ms. Pallavi Luthura was a whole time director in the
4 ITA No.1960/Del./2017

assessee company and was paid remuneration for the work assigned to
her during the year under assessment. So, we are of the considered view
that merely on the basis of conjectures and surmises, provisions
contained u/s 40A(2)(b) cannot be allowed to be invoked particularly
when genuineness of the services rendered are not in dispute. So, we
are of the considered view that AO as well as ld. CIT (A) have erred in
disallowing the remuneration to the tune of 35% paid to Ms. Pallavi
Luthura by the assessee company, hence ordered to be deleted.
Consequently, the appeal filed by the assessee is allowed.

Order pronounced in open court on this 10th day of February, 2021.

Sd/- sd/-
(R.K. PANDA) (KULDIP SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated the 10th day of February, 2021
TS

Copy forwarded to: AR, ITAT
1.Appellant NEW DELHI.
2.Respondent
3.CIT
4.CIT(A)-9, New Delhi.
5.CIT(ITAT), New Delhi.

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