2011 (5) TMI 976 - AT - Income Tax

Summary

Issues involved: Appeal against disallowance of commission and bonus paid to directors u/s 36(1)(ii) for Assessment Year 2006-07.

Issue 1 - Disallowance of Commission and Bonus:
The Assessing Officer disallowed &8377; 77,37,965/- paid to directors as commission and bonus under sec. 36(1)(ii) as it could have been paid as profit or dividend. The CIT(A) upheld this disallowance based on a previous decision for the Assessment Year 2005-06. However, the Tribunal reversed the CIT(A)'s order for the same issue in the Assessment Year 2005-06, holding that the commission paid to directors was not receivable as profit or dividend. The High Court also upheld this decision, stating that no question of law arises. The Tribunal's decision in the Assessment Years 2002-03 and 2007-08 also supported the allowance of commission and bonus to directors. Therefore, the disallowance was deleted in favor of the assessee.

Issue 2 - Disallowance under sec. 14A:
Ground No.5 regarding disallowance of &8377; 48,357/- under sec. 14A was not pressed by the assessee's counsel and hence, was dismissed.

In conclusion, the appeal was partly allowed, and the disallowance of commission and bonus to directors under sec. 36(1)(ii) was deleted based on the Tribunal's decisions and the High Court's affirmation.