Remuneration to director u/s.40A(2)

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Guest

Dear,

Payment made to relatives in excess of requirement Sec.40A(2)

Any payment made by assessee to related person - disallowed to the extent it is

	Excessive or unreasonable		as per Assessing officer.

Excessive or unreasonable

Whether any expenditure is in excess or unreasonable is to be decided after
considering

Fair market value of goods, services or facilities for which payment made
or
Legitimate need of the business or profession of assessee
or
Benefit arising to assessee there from.

ABC Private Limited

Paid remuneration to its directors as follows :
				Total
X	Managing Director	Rs.8,00,000 p.m		9600000
Y	Director	Rs.8,00,000 p.m		9600000
Z	Director	Rs.8,00,000 p.m		9600000
				28800000

Turnover Rs.27,90,99,538/-

Profit before tax Rs.9,18,00,217/-

Whether remuneration paid by company to its director is excessive or not ?

is there any case law for the above situation,if any

Please Advise.

Thanks & Regards

Replies (5)

CA Navin Jain

MANAGER (FINANCE & ACCOUNTS)

11768 Points Joined June 2008

DIRECTOR REMUNERATION IS NOT EXCESSIVE

Amir

Learner

4016 Points Joined December 2009

Hi Bro.,

Whether any payment is excessive or not is something which is to be decided on the facts of each case.

The three points that u have mentioned substantiate this statement. My understanding says Case Laws can't be referred in support of question of facts.

Lot many aspects are involved and the question of excessive can't just be decided on the figures.

It is something similar to the concept of materality that differs from situation to situation & from person to person for the same situation.