2020 (2) TMI 1627 - AT - Income Tax

Disallowance of bonus paid to director u/s 36(i)(ii) - higher bonus is paid to Shri Ashutosh Sharma - recipient of the bonus must have paid Income Tax on the receipt- HELD THAT - As decided in own case for Assessment Year 2013-14 there is no merit in the AOs contention, even if the assessee arguments of double taxation and the fact of TDS is negated. Any expenditure cannot be disallowed unless it is found to be not wholly and exclusively incurred for the purposes of business. The Assessing Officer, is, therefore, directed delete the disallowance on this account. Appeal of assessee allowed.

Summary

Issues:
Disallowance of bonus paid to Shri Ashutosh Sharma under section 36(1)(ii) of the Income-tax Act, 1961.

Analysis:
The appeal was filed against the order of the CIT(A)-2, New Delhi concerning the disallowance of a bonus paid to Shri Ashutosh Sharma amounting to ?9,26,66,708 for the assessment year 2015-16. The Assessing Officer disallowed the bonus, and the CIT(A) upheld the decision. The assessee contended that similar disallowances were made in previous assessment years but were subsequently allowed based on directions from the Dispute Resolution Panel (DRP) and the CIT(A) in those years. The DR argued that the facts of the current case were different from previous years. However, upon reviewing the orders of the authorities and the directions given by the DRP in the previous assessment years, the ITAT found that for similar reasons, disallowances were made but later directed to be deleted. The ITAT cited the directions from the DRP and the CIT(A) in previous years where they held that the bonus paid to Shri Ashutosh Sharma should be allowed as it was incurred wholly and exclusively for the purposes of business. As no distinguishing decision was presented, the ITAT followed the decisions of previous years and directed the Assessing Officer to delete the disallowance. Consequently, the appeal of the assessee was allowed, and the impugned disallowance was deleted.