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2012 (12) TMI 116 - ITAT DELHIForeign exchange fluctuation loss - restatement of debtors and a further loss on account of revaluation of foreign currency – Held that:- Assessee company by revaluing the foreign currency assets at the closing rate and by recognizing the exchange difference arising as expenses ensured adherence to the mandatory requirement laid under accounting standard AS11 of the ICAI. It has further been claimed that the assessee maintained its accounts as per the accrual system of accounting and has been following this accounting and the same is also in line with the Standard Accounting policies and practices being followed by the industry at large - loss suffered by the assessee on account of foreign exchange difference as on the date of balance sheet is an item of expenditure u/s. 37(1) - in favour of the assessee Addition - expenses incurred on birthday and anniversary gifts given to Directors and other managerial persons – alleged that these expenses were of personal nature – Held that:- Expenses were incurred by the assessee on birthday and anniversary gift given to the Director and other managerial persons. These expenditure can certainly be categorized as expenditure for the purpose of business as the same amount was to boost the moral of the employees - expenditure in this regard is duly allowable - in favour of the assessee. Addition on account of commission paid to Directors – alleged that in this regard the two employee director also happen to be share holder of the company holding 19.80% and 12.40% of shares of the company – Held that:- Compensation for both the directors were structured in such a way that apart from getting a fixed remuneration for their services rendered, they would also be entitled to receive commission based on the profitability of the company - assessee has paid taxes at maximum marginal rate. Both the Directors have admitted the payment of commission received and offered the same in their income tax returns and had paid at a maximum marginal rate. This clearly establishes the fact that there has been no tax avoidance motive behind the payment of commission to the directors by the assessee company - payment of commission was justified and not disallowable u/s 36(1)(ii) of the IT Act - in favour of assessee.
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