2013 (3) TMI 858 - AT - Income Tax

Summary

Issues involved: The judgment involves issues related to disallowance/addition of commission u/s 36(1)(ii) of the Income-tax Act, entitlement for deduction u/s 80-IB(10) of the Act, approval and completion certificate in the name of the director, and disallowance u/s 14A of the Act.

Disallowance/Addition of Commission u/s 36(1)(ii): The Revenue challenged the deletion of disallowance of commission paid to the managing director of the assessee-company. The Tribunal analyzed the legal implications of section 36 of the Income-tax Act, which allows deductions for sums paid as bonus or commission. It was observed that the managing director was not an employee of the company and hence not entitled to the deduction. The Tribunal held that the commission paid was part of the salary and not subject to disallowance under section 36(1)(ii). The disallowance made by the Assessing Officer was deemed unjustified and deleted.

Entitlement for Deduction u/s 80-IB(10): The Revenue contended that the assessee did not qualify for deduction under section 80-IB(10) as it did not follow the standard procedure of land acquisition and construction. However, based on previous judgments and the business model employed by the assessee, the Tribunal upheld that the assessee was entitled to the deduction as a developer of housing projects. The Tribunal found that the legal ownership of the land was not a mandatory criterion for qualifying as a developer, provided other statutory conditions were met.

Approval and Completion Certificate in Director's Name: The Revenue raised concerns about the approval and completion certificate being in the name of the director, not the company, questioning the developer status of the assessee. The Tribunal clarified that the director acted in a fiduciary capacity recognized in law, and there was no distinct line between the company and its directors in procedural matters. The ground raised by the Revenue was rejected.

Disallowance u/s 14A of the Act: The Assessing Officer disallowed a certain amount under section 14A, which was reduced by the Commissioner of Income-tax (Appeals). The Tribunal agreed with the Commissioner's adjustments in apportioning interest and administrative expenses, leading to a relief granted to the assessee. The Tribunal found no valid grounds for the Revenue to challenge this issue and dismissed the appeal.