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TMI Blog2011 (5) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee company filed its return of income on 27.11.2006 for the relevant Assessment Year 2006-07 declaring total income at ₹ 1,85,42,920/-. The Assessing Officer then completed the assessment under sec. 143(3), dated 12.11.2008. In the assessment, the Assessing Officer disallowed the commission and bonus amounting to ₹ 77,37,965/- paid to the Managing Director and two Directors of the company as he was of the view that the same was not allowable as per the provisions of sec. 36(1)(ii) of the Act. The AO s observations in this regard are as under:- The reply of the assessee has been considered carefully but cannot be accepted. The issue here is the allowability of Bonus/Commission paid to an employee (Directors who are al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd. In the instant case the company is avoiding tax to the extent of 13.5% as dividend distribution tax even after accepting the argument of the assessee that directors are paying tax on commission received by them, by resorting to such means. The perusal of details of P L account revels that commission and bonus of ₹ 77,37,965/- was paid to the managing director and two directors of the company which is not allowable as per the provision of section 36(1)(ii) of the I.T. Act, and hence the same is added to the total income of the assessee. (Addition of Rs:-77,37,965/-). 4. Being aggrieved, the assessee preferred appeal before the learned CIT(A). 5. After considering the submissions of the assessee and the AO s order, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d against by the assessee before the Tribunal, and the Tribunal vide order dated 11.12.2009 in ITA No.394/Del/2009 reversed the CIT(A) s order and decided the issue in favour of the assessee by observing and holding as under:- 6. We have considered the rival contentions and gone through the record carefully. Sec.36(1)(ii) of the Act has a direct bearing on the controversy. Therefore, it is salutary upon us to take note of this clause. It reads as under: The deductions provided for in the following clauses shall be allowed in respect of the matter dealt with therein in computing the income referred to in sec. 28 of the Act. Section 36(1) (i) x x x x x (ia) x x x x x (ib)x x x x x Any sum paid to an employee as bonus or co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et a substantial share whereas she was not playing any active role in the day to day business of the assessee company. The two other directors who had received the commission had a very small shareholding pattern would not be able to get the amount equivalent to the commission in the shape of dividend. Thus, exactly the commission amount would not be receivable by the directors in the shape of dividend. The directors to whom commission was paid is not with respect to their shareholding pattern rather it is linked with the sales turnover of the assessee and to the performance of the directors. It has nothing to do with the shareholding pattern. The next reason weighed in our mind is that in the past similar commission was paid to the working ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the decision of I.T.A.T in assessee s own case and Revenue has not brought on record any material to distinguish the facts of the case in the year under consideration with reference to assessment year 2005-06, we do not find any reason to differ with the order passed by I.T.A.T. Delhi Bench `B for assessment year 2005- 06. Accordingly, we do not find any infirmity in the order passed by the ld. CIT(A) deleting the addition. 13. In the light of the discussions made above, it is thus clear that the issue is squarely covered by the decision of Tribunal in assessee s own case in Assessment Year 2005-06, which has been followed in Assessment Years 2002-03 and 2007-08. It is also seen that the Tribunal s order passed in Assessment Yea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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