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TMI Blog2011 (7) TMI 1253X X X X Extracts X X X X X X X X Extracts X X X X ..... oring the provisions of section 36(1)(ii) are clearly applicable in this case. 3. In this case, the Assessing Officer noted that during the year under consideration assessee has paid salary and other allowances to its Directors, as per Board Resolutions. The payment also includes commission/bonus of ` 30,00,000/- paid to its director of the company namely Shri Mahesh Chandra. Assessing Officer was of the opinion that provision of section 36(1)(ii) are applicable. He noted that Director was also a shareholder in the company. Thus, Assessing Officer observed, it was clear that in case of directors of the company the sum paid as commission and bonus could have been paid as profit or dividend which has not been done. Assessing Officer note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has been held as under:- 4. We have carefully considered the rival submissions and perused the material on record. We have also gone through the orders of the authorities below as well as the decisions relied upon by the learned AR before us. We have also gone through the written synopsis and paper book filed and relied on by the assessee. We noted that there are two whole-time working directors, namely, Mr. Raj Bhatia and Mrs. Kavita Bhatia with the assessee-company who were paid remuneration. Apart from the fixed remuneration, remuneration was also paid in the form of commission on turnover at the rate of 0.5 per cent. The total amount so paid is ₹ 30lakhs. This remuneration including commission was approved in the general me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nover has been paid to both the directors in assessment year 2004-05 also which has been allowed in assessment of the assessee-company. All these facts show that commission payment has been accepted by revenue itself for the purpose of the business of the assessee-company and, thus, there was no question of disallowance of the commission in the year under appeal. It is cardinal principle of law that while judging the commercial expediency of an expense, the matter needs to be looked into from the view of the assessee and not from the point of view of revenue only. This was so held by Supreme Court in the decisions of CIT v. Walchand Co. P Ltd. [1967J 65 ITR 381 and J.K. Woollen Manufacturers v. CIT [1969] 72 ITR 612. Revenue has raised in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid as fixed percentage of turnover is nothing but assessable as salary. Thus, section 36(1)(ii) has got no application. Further the contention of the assesses is also duly supported by the decision of Supreme Court in the case of Shahjada Nand Sons v. CIT [1977J 108 ITR 358 in which the Apex Court held that commission paid to the employees is allowable and there is no need for any contractual obligation or extra services performed by the assessee. We, therefore, are of the opinion that the commission payment of ₹ 30 lakhs to the whole-time working directors of the assesseecompany disallowed by Assessing Officer was rightly deleted by CIT(A) and, accordingly, we do not find any infirmity in the order of CIT(A). We, therefore, confir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... records. We find that Ld. Commissioner of Income Tax (Appeals) has found that assessee was paying Shri Mahesh Chandra as share holder a sum of ` 25 lacs per annum as salary. This compared very favourably with the salary being disbursed in the industry in which the assessee was placed. Moreover, all disbursements to Sh. Mahesh Chandra was cleared by Board Resolutions. The profit of the assessee company has also arisen phenomenally during the year. In other words, commission and bonus paid to Sh. Mahesh Chandra was an incentive, which was directly related to the profitability of the company. TDS was also deducted on the incentives paid to Shri Mahesh Chandra. In such circumstances, we agree with the Ld. Commissioner of Income Tax (Appeals) t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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