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TMI Blog2013 (11) TMI 1333X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year under consideration, the assessee company has paid commission of Rs. 75,40,000/- to its Managing Director Shri Raj Kumar Bardeja. That there was an employer employee relationship between the assessee company and Shri Raj Kumar Bardeja who was full time looking after the affairs of the assessee company. That in the earlier year, similar commission paid to him was disallowed by the Assessing Officer on the ground that on the payment of commission, the assessee was supposed to deduct tax under Section 194H. Since the assessee had not deducted any tax under Section 194H, the payment of commission was disallowed under Section 40(a)(ia). That on appeal, the ITAT accepted the assessee's contention that the payment of commission was part of salary and tax was already deducted as per Section 192 of the Income-tax Act, 1961. Therefore, the disallowance made by the Assessing Officer was deleted. That the above order of the ITAT was challenged by the Revenue before the Hon'ble Jurisdictional High Court which also upheld the order of the ITAT. That in the year under consideration, the Assessing Officer disallowed the commission by taking a different stand and applying prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated by the learned counsel that he was the Managing Director of the assessee company and he was responsible for the overall management of the company. That the payment of salary as well as commission is made to him as per the Board's Resolution dated 13th March, 2005. Copy of the resolution is placed at pages 27 & 28 of the assessee's paper book. 6. We have carefully considered the arguments of both the sides and perused the material placed before us. We find that the issue under consideration is covered by the decision of Hon'ble Jurisdictional High Court in the case of AMD Metplast P.Ltd. (supra), wherein their Lordships held as under:- "allowing the appeal, that A was the managing director and in terms of the board resolution was entitled to receive commission for services rendered to the company. It was a term of employment on the basis of which he had rendered service. Accordingly, he was entitled to the amount. Commission was treated as a part and parcel of salary and tax had been deducted at source. A was liable to pay tax on both the salary component and the commission. The payment of dividend was made in terms of the Companies Act, 1956. The dividend had to be pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' which has been defined in Explanation-1 belong Section 40(ia) covers the commission paid for rendering of services on behalf of another person or in relation to the rendering of services in the course of buying or selling of goods. In the instant case, the amount paid to Shri Bardeja, MD of the company, towards commission does not fall within the ambit of this Explanation-1 because he was not acting on behalf of others but has rendered services to the assessee company on his own behalf. The said payment was also not for any services rendered in the course of buying or selling of goods or in relation to any transaction relating to any assets, valuables, article or thing. Shri Bardeja had also included the income in its taxable return on its receipt. The detailed finding recorded by the CIT(A) at para 2 has not been controverted by the learned DR. We therefore do not find any reason to interfere with the same. In the result, this ground of Revenue in both the years are dismissed." (emphasis by underlining supplied by us) 9. That the Revenue had filed appeal against the above order before the Hon'ble Jurisdictional High Court. The Hon'ble Jurisdictional High Court, vide or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Hon'ble Jurisdictional High Court in the case of AMD Metplast P.Ltd. (supra), hold that the disallowance of commission paid to Shri Raj Kumar Bardeja was not justified. Accordingly, ground No.1 of the assessee's appeal is allowed. 11. Ground No.2 of the assessee's appeal reads as under:- "That the order u/s 250 passed by the Learned Commissioner of Income-tax (Appeals) VIII, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Learned Addl. Commissioner of Income-tax, Range-5, New Delhi in making disallowance of Rs. 58,667/- on account of remission/cessation of liability u/s 41(1) of the Income-tax Act, 1961 by ignoring the fact that the said amount had been shown as liability in the books of account and were still due to the relevant parties." 12. The Assessing Officer made the addition of Rs. 58,667/- on account of remission/cessation of liability under Section 41(1) of the Income-tax Act. It was contended by the learned counsel that there was no remission or cessation of liability and these liabilities were not written off in the assessee's books of account. Merely because the assessee could not produce the confir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceased." 15. The ratio of the above decision of ITAT Delhi Bench is squarely applicable to the facts of the present case. Respectfully following the same, we hold that learned CIT(A) was not justified in upholding the disallowance made on account of remission/cessation of liability. Ground No.2 of the assessee's appeal is accordingly allowed. Ground No.3 of the assessee's appeal reads as under:- "That the order u/s 250 passed by the learned Commissioner of Income-tax (Appeals) V, New Delhi is against law and facts on the file in as much as he was not justified in upholding the disallowance of Rs. 1,91,533/- u/s 14A of the Income-tax Act, 1961 by ignoring the factual position and the submissions made on behalf of the appellant company." 16. At the time of hearing before us, no argument was advanced against the above disallowance made under Section 14A. We, therefore, infer that the assessee is not interested in pressing ground No.3 of its appeal. Accordingly, the same is treated as not pressed and rejected as such. ITA No.3985/Del/2011 (K.L.Steels Pvt.Ltd.) - AY 2008-09 :- 17. Ground No.1 of the assessee's appeal is identical to ground No.1 of its appeal for AY 2007-08. For t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is case, the Assessing Officer himself in the assessment order has accepted the assessee's contention that the payment of commission was for the services rendered by them. It is evident from paragraph 3.3 of the assessment order which reads as under:- "(a) The assessee has failed to substantiate the specific services rendered by the Directors for earning such commissions over and above the remuneration. In fact the services rendered were only in the nature of general management of affairs of the company for which salary has already been paid to the Directors. It appears that the assessee has made this arrangement just to avoid the restriction of maximum permissible remuneration as per Schedule XIII, Part-II, Section-II Sub-section (1)(v) of the Companies Act which says that the monthly remuneration payable to a Director shall not exceed Rs. 2,50,000/- i.e. Rs. 30 lacs per annum where the effective capital of the company is Rs. 5 crores or more but less than Rs. 5 crore which applies in the case of the assessee. In fact, the assessee has also conceded in its letter dated 17.11.2009 that the commission paid to Directors are for the services rendered by them and the same is part of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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