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2019 (5) TMI 847 - AT - Income TaxBonus paid to one of its Director - deduction u/s 36(1)(ii) - assessee company has paid salary and other allowances to its Directors as per the Board Resolutions - HELD THAT - In assessee s own case for the assessment year 20010-11 2018 (2) TMI 1885 - ITAT DELHI Delhi Bench of the Tribunal reveals that Sh. Sanjay Mehta had rendered services to the assessee company during the financial year 2009-10 relevant to assessment year 2010-11 and allowed the bonus payment to him and allowed the same as deductible business expenditure. Keeping in view of the facts and circumstances of the case as explained above and adhering to the doctrine of Stare decisis, we do not find any infirmity in the impugned orders of the Ld. CIT(A), hence, we uphold the action of the Ld. Commissioner of Income Tax(A) of deleting the additions - Decided in favour of assessee.
Issues Involved:
1. Deletion of addition on account of bonus paid to a Director under Section 36(1)(ii) of the I.T. Act, 1961. 2. Right to amend, modify, alter, add or forego grounds of appeal. Detailed Analysis: 1. Deletion of Addition on Account of Bonus Paid to a Director under Section 36(1)(ii) of the I.T. Act, 1961: The primary issue in both appeals (ITA No. 2990/Del/2016 and ITA No. 2991/Del/2016) involves the deletion of additions made by the Assessing Officer (AO) concerning the bonus paid to one of the Directors, Mr. Sanjay Mehta, by the assessee company. The AO disallowed the bonus payments of ?1,77,79,000/- for AY 2011-12 and ?1,77,37,500/- for AY 2012-13 under Section 36(1)(ii) of the I.T. Act, 1961, arguing that the bonus could have been paid as profit or dividend instead. The AO observed that the company had incurred a loss during the relevant years and that the bonus paid was significantly higher than the salary, with no substantial evidence provided to justify the performance of the Director. The AO also referenced the Hon'ble Bombay High Court's view in Loyal Motor Service Co. Ltd. vs. CIT (1946), asserting that the restriction on bonus payments is designed to prevent tax avoidance by distributing profits as bonuses instead of dividends. The CIT(A) deleted the additions, noting that similar circumstances in earlier assessment years (2007-08, 2009-10, and 2010-11) had resulted in the deletion of similar disallowances. The CIT(A) emphasized that Mr. Sanjay Mehta held only 11% of the company's shares, and if the bonus had been paid as dividends, the company would have had to distribute a much larger amount, which was not feasible given its financial position. The Tribunal upheld the CIT(A)'s decision, noting that the AO failed to substantiate the claim that the bonus should have been paid as dividends. The Tribunal also highlighted that the bonus was a variable remuneration decided by the Board and paid during the year, and no bonus/dividend was paid to other major shareholders. The Tribunal referenced previous orders and the doctrine of Stare decisis to support its decision. 2. Right to Amend, Modify, Alter, Add or Forego Grounds of Appeal: The Revenue's grounds of appeal included a standard clause reserving the right to amend, modify, alter, add, or forego any grounds of appeal at any time before or during the hearing of the appeal. This issue is procedural and does not impact the substantive analysis of the case. Conclusion: The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s decision to delete the additions related to the bonus payments to the Director. The Tribunal found no infirmity in the CIT(A)'s orders and adhered to the doctrine of Stare decisis, emphasizing the consistency of the decisions in similar circumstances in earlier assessment years. The Tribunal's order was pronounced on 10-05-2019.
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