2013 (8) TMI 479 - AT - Income Tax

TDS u/s 194H - commission paid to the directors - Disallowance for remuneration/commission - Held that - no tax was deducted at source from remuneration/commission paid to the director - No valid material showed on record to derive from judgment for CIT(A) - No distinguishable facts could also be pointed out - No Infirmity in order of CIT(A) - Following decision of Jahangir Biri Factory (P) Ltd vs D.C.I.T. 2009 (3) TMI 215 - ITAT CALCUTTA-C - Decided in favour of Assessee.

Summary

Issues:
- Whether the ld. CIT(A) erred in deleting the addition considering the commission as part of salary.

Analysis:

The appeal was filed by the Revenue against the order of the ld. CIT(A)-XXXIII, Kolkata, dated 26.09.2011. The main issue in this case was whether the ld. CIT(A) was correct in deleting the addition by treating the commission as part of the salary. The AO disallowed the deduction for remuneration/commission paid to the director, amounting to Rs.11,94,000, under section 40(a)(ia) of the Act due to non-deduction of tax at the source. However, the ld. CIT(A) deleted the disallowance by relying on the decision of the Kolkata Bench of the Tribunal in a similar case.

Upon hearing the arguments from both sides, the Tribunal observed that the commission paid to the director was considered part of the salary/remuneration and not in the nature of commission or brokerage as per section 194H or "fees for professional or technical services" under section 194J of the Act. The Tribunal noted that companies often pay a variable component like incentives or commission in addition to fixed salaries to directors. Referring to clause (iv) of Sec.17(1), the Tribunal concluded that commission paid to the director, in pursuance of the terms of employment, is indeed part of the salary and not subject to tax deduction at source under section 40(a)(ia).

The Tribunal upheld the decision of the ld. CIT(A) to delete the disallowance of Rs.11,94,000 for remuneration/commission paid to the director. It was noted that the ld. DR failed to provide any evidence to challenge the decision based on the Kolkata Bench's ruling. No higher forum had overturned the Tribunal's decision, and no distinguishable facts were presented by the ld. DR. Consequently, the Tribunal found no fault in the ld. CIT(A)'s order and dismissed the Revenue's appeal, confirming the deletion of the disallowance.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the decision of the ld. CIT(A) to delete the disallowance of the commission treated as part of the director's salary. The judgment highlighted the distinction between commission and salary, emphasizing that commission paid to directors falls under the purview of salary and is not subject to tax deduction at source under section 40(a)(ia) of the Act.