2010 (8) TMI 1038 - AT - Income Tax

Summary

Issues Involved:
1. Legality of the CIT(A) order.
2. Disallowance of commission paid to the Managing Director u/s 36(i)(ii).
3. Addition made by invoking provisions of sec. 40A(3).

Summary:

Issue 1: Legality of the CIT(A) order

The revenue contended that the CIT(A) order was "wrong, perverse, illegal and against the provisions of law." However, the Tribunal did not find merit in this argument and dismissed the appeal.

Issue 2: Disallowance of commission paid to the Managing Director u/s 36(i)(ii)

The revenue argued that the commission of Rs. 3,60,416/- paid to the Managing Director, who is also a shareholder, was in contravention of sec. 36(i)(ii). The Tribunal noted that this issue had been previously decided in favor of the assessee for A.Y. 2005-06 and 2006-07. The commission was part of the remuneration approved by the shareholders and the Company Law Board, and had been paid since 1993. The Tribunal upheld the CIT(A)'s decision, stating that the commission did not fall within the scope of sec. 36(i)(ii) as it was authorized by the AGM and approved by the department of company affairs.

Issue 3: Addition made by invoking provisions of sec. 40A(3)

The revenue challenged the deletion of an addition of Rs. 9,83,71,752/- made by the AO u/s 40A(3), arguing that the assessee failed to prove that payments were made directly to individual growers/villagers and farmers. The Tribunal referred to its earlier orders where similar disallowances were deleted. It was found that the payments fell under clauses (f) and (I) of Rule 6DD, which exempt certain payments from the provisions of sec. 40A(3). The Tribunal noted that the payments were made for the purchase of animal produce, which is covered under Rule 6DD(f)(ii). The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the relief granted to the assessee.

Conclusion:

The appeal filed by the revenue was dismissed on all grounds.

Order Pronounced:

The order was pronounced in the open court on 13.8.10.