9911796707
TMI Blog2022 (4) TMI 691X X X X Extracts X X X X X X X X Extracts X X X X ..... stoppel are not applicable in taxation matters. However, it has been held that a departure from a finding during the past years would result in a contradictory finding. This Court in AMD Metplast Pvt. Ltd. [ 2011 (12) TMI 320 - DELHI HIGH COURT] as well as in CIT v. Career Launcher India Ltd.[ 2012 (4) TMI 440 - DELHI HIGH COURT] has upheld grant of bonus by companies to its directors. Consequently, this Court is of the view that there is no bar on payment of bonus and the issue whether bonus is to be granted or not is essentially a question of fact. In the present case, none of the authorities below have opined that grant of bonus to the Directors would either endanger the existence of the corporate entity or was prohibited und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. 3. He emphasizes that there is a distinction between a corporate entity and its directors. He states that if a huge amount is paid as a bonus to the Directors of a company, the corporate entity itself may not survive. He submits that The Payment of Bonus Act, 1965 prohibits grant of bonus. 4. Learned counsel for the appellant further states that in view of provisions of Section 36(1)(ii) of the Act, the sum paid to an employee as bonus is allowable only when such bonus or commission has been paid for the services rendered. He states that the ITAT has erred in not appreciating that CIT(A) in its order had distinguished the findings of DRP for the Assessment Year 2013-14 and observed that the direction of the DRP has given no f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax (1946) 14 ITR 647 (Bom.) has held as under: Now the facts as shown by the reference are that this company was formed by fourteen persons, thirteen of whom were originally owner-drivers of motor vehicles, the fourteenth member contributing in money. The thirteenth not only contributed their motor vehicles but also their services and accordingly become employees of this company. Besides the thirteen there are twenty-eight other employees making a total of forty-one. In the year in question the company granted a bonus at the rate of two months salary to its forty-one employees and the total sum required to pay this bonus was ₹ 6,084/-of which ₹ 1,954/-went to the twenty-eight other employees and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, unless the commission or bonus would be paid to the assessee as profits or dividends the exception to the allowance does not operate. Mr. Setalvad on behalf of the Commissioner has pointed put with considerable force that strictly construed there can hardly ever be a case which comes within the ambit of the exception. Sir Jamshedji Kangaon behalf of the assessee company suggests two such cases, viz., in the case of what is generally called a one-man company which is not unlawful under the Indian Companies Act, and is also a case in which a company, in declaring a dividend, or a partnership, in declaring division of their profits, say that instead of distributing their profits by way of dividends, or shares of profits, they will distribut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyee, if the same amount would have been paid to him as a shareholder as dividend or profit, the company cannot be allowed a deduction on the ground of payment of bonus. To put it in other words the clause is intended to prevent an escape from taxation by describing a payment as bonus, when in fact ordinarily it should have reached the shareholder as profit or dividend. The argument would be equally applicable in the case of a partnership as in the case of a limited company. This construction leads to no hardship. It does not allow a wrong payment of bonus to escape taxation. In the first instance the bonus in the hands of the employee is liable to be taxed, unless exempted by a special notification. Moreover, the proviso contains conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to be given to the question referred to us. 8. This Court in AMD Metplast Pvt. Ltd. V. DCIT, (2012) 341 ITR 0563 as well as in CIT v. Career Launcher India Ltd., (2013) 358 ITR 0179 (Delhi) has upheld grant of bonus by companies to its directors. Consequently, this Court is of the view that there is no bar on payment of bonus and the issue whether bonus is to be granted or not is essentially a question of fact. 9. In the present case, none of the authorities below have opined that grant of bonus to the Directors would either endanger the existence of the corporate entity or was prohibited under The Payment of Bonus Act, 1965 or was not proportionate to the services rendered by the respondent-Director. 10. In fact in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
