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TMI Blog2013 (11) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the revenue and the grounds taken by the assessee in cross objections are as under :- "1. The learned CIT (A) erred in upholding disallowance of Rs. 1,40,685/- being 20% of foreign travel expenses of Rs. 7,03,425/- by treating it as personal. 2. The learned CIT (A) erred in facts in stating that "most of the visits the Managing Directors and the Directors are accompanied by their spouse and have traveled to locations with which they have no business dealing." 2. The brief facts of the case are that assessee is a private limited company and is engaged in the business of manufacturing of Fin and Tube Type Cooling & Condensing Coil for all types of air-conditioners and refrigerators. The assessee filed its return of income for the assessment year 2008-09 at Rs. 5,12,70,270/-. The case of the assessee was selected for scrutiny and assessment was completed after making the following additions :- (i) Commission to Managing Director/ Director (Operations) Rs. 48,16,429/- (ii) Disallowance of bad debts written off Rs. 15,77,102/- (iii) Out of foreign travel expenses Rs. 1,40,685/- As regards first addition of commission to Directors, the assessee had submitted before AO that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of ACIT vs. Bony Polymers (P) Ltd. reported in 36 SOT 456 (Delhi), it was held that where there were no material on record indicating that AO could presume that had the commission not been paid. It would have necessarily been paid as dividend to shareholders the provisions of section 36(1)(ii) under similar circumstances were not held to be attracted. The payment to Managing Director was paid as a prudent business decision. 5. The ld. CIT (A) after going through the submissions made by the assessee deleted the addition made by the AO. With respect to second addition of disallowance of bad debts written off, the ld. AR submitted before the ld. CIT (A) that bad debts under section 36(1)(vii) were allowable on the condition that bad debts had been written off in the books of account and after amendment in section w.e.f. 01.04.1989, there were no requirement to furnish evidence that sufficient efforts were made for recovery of debts. Reliance was placed on the judgments in the following cases :- (i) TRF Limited vs. CIT - 190 Taxman 391 (SC); and (ii) CIT vs. Smt. Nolifer I. Singh - 176 Taxman 252 (Del) Ld. CIT (A) after going through the submissions deleted the disallowance m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment of commission of directors are placed. Our attention was also invited to the provisions of Companies Act and it was argued that the payment was made in accordance with the provisions of Companies Act and was duly authorized by Board of Directors. He further argued that shareholding of both the directors taken together was less than 50%. With respect to case law relied upon by DR, the ld. AR submitted that facts and circumstances of the present case are not similar to the facts and circumstances of that case as in that case, there were only three directors and three were the only shareholders whereas in the present case there are five directors and 12 shareholders. Reliance was placed on the judgment of AMD Metplast (P) Ltd. vs. DCIT - 341 ITR 563 and CIT vs. Career Launcher (India) Ltd. - 250 CTR 240 (Del.). 10. As regards the disallowance of bad debts written off, the ld. AR submitted that AO had relied on the provisions of Income tax Act which were prevalent before 01.04.1989 wherein the assessee was required to show that some efforts had been made to recover the debts. He argued that from 01.04.1989, it was sufficient if bad debts are written off in the profit and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Companies Act, 1956. Dividend has to be paid to all shareholders equally. This position cannot be disputed by the Revenue. Dividend is a return on investment and not salary or part thereof. Herein the consideration in the form of commission which was paid to Ashok Gupta was for services rendered by him as per terms of appointment as a managing director." In the present case also, the payment of commission was paid to Managing Director and Director (Operations) as per their terms of appointment as is apparent from Board Resolution placed at page 8 & 9 of the paper book. Therefore, in view of the above, we hold that the payment of commission was a genuine business expenditure and we do not see any reason to interfere in the order of ld. CIT (A). In view of the above, the first ground of the revenue is dismissed. 13. As regards second ground of appeal regarding deletion of addition of Rs. 15,77,102/- on account of bad debts written off, we have observed from page 30 that bad debts mostly related to amounts receivable from customers. The relevant copies of invoices against which payment could not be collected by assessee are placed at pages 31 to 50 of the paper book. As per the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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