9911796707
TMI Blog2024 (4) TMI 931X X X X Extracts X X X X X X X X Extracts X X X X ..... king (P.) Ltd.[ 2011 (6) TMI 251 - ITAT, MUMBAI] has been rendered in its own set of facts, which are completely different from the facts of the present case. Further from the financial statement of the assessee, we find that the turnover from the sale of products increased from Rs. 39.77 crore in the assessment year 2014-15 to Rs. 61.61 crore in the assessment year 2015-16. The aforesaid facts also distinguish the present case from the facts in Dalal Broacha Stock Broking (P.) Ltd. (supra), as in that case, it was noted by the Special Bench that the steady rise in performance was due to improved market conditions as the taxpayer was a stockbroker who was getting commission on sale/purchase of shares by the investor/traders. However, in the line of business of the assessee, wherein it is engaged in dealing in computers, networking solutions, and providing maintenance and facility management services, it cannot be denied that without the dedicated efforts turnover from sales and services cannot increase. Thus, aforesaid factors also support the case of the assessee that the bonus was a reward for the work of the promoter directors, who were actively involved in the day-to-day affair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without granting a physical hearing through Video Conferencing. 3. The issue arising in ground no.1 pertains to the disallowance of bonus paid to directors u/s 36(1)(ii) of the Act. 4. The brief facts of the case pertaining to this issue are that the assessee is engaged in the business of dealing in computers, networking solutions, and providing maintenance and facility management services. For the year under consideration, the assessee filed its return of income on 30/09/2015 declaring a total income of Rs. 3,23,05,088/-. The return filed by the assessee was selected for verification of payment made to parties u/s 40A(2)(b) of the Act and for verification of TDS deducted or collected but not deposited with the Government. During the assessment proceedings, on perusal of the details filed by the assessee, it was observed that during the year under consideration, the assessee not only paid higher remuneration to its directors, i.e. Shri Amul D Mahale and Shri Chetan R Goyani, but in addition to the same also paid a bonus of Rs. 96 lakh each to both of them. Accordingly, the assessee was asked to justify the allowability of bonus paid of Rs. 1,92,00,000, as per provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the amount of Rs. 1.92 crore would have been paid as a dividend to the shareholders, the assessee would be also liable to pay dividend distribution tax at 15% of the entire amount. Thus, the AO concluded that the payment of bonus of Rs. 1.92 crore is nothing but a colourable device, which is prohibited by the provision of section 36(1)(ii) of the Act. Accordingly, the AO disallowed the amount of Rs. 1.92 crore u/s 36(1)(ii) of the Act. 6. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee and upheld disallowance made u/s 36(1)(ii) of the Act. Being aggrieved, the assessee is an appeal before us. 7. We have considered the submissions of both sides and perused the material available on records. In the present case, the assessee paid a bonus in addition to the remuneration to two of its directors, i.e. Shri Amul D Mahale and Shri Chetan R Goyani, during the year under consideration. It is undisputed that Shri Amul D Mahale and Shri Chetan R Goyani are holding 49.77% and 47.23%, respectively, of the equity shares of the assessee. Since the payment was made to the directors of the company, it is evident from the records that the AO initially made ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s entirety, it cannot be disputed that the shareholder-employee is also covered within its ambit. Ostensibly, in the present case, a sum of Rs. 96 lakh each has been paid as a bonus to both directors, who are also holding 49.77% and 47.23% equity shares of the assessee. Therefore, now the question arises that if such a sum, i.e. Rs. 1.92 crore in total, is not paid as a bonus by the assessee whether the same would be payable as profits or dividend to the shareholder directors. In order to answer this question, at the outset, it is pertinent to note that the distribution of dividend depends on various factors. Therefore, even assuming that during the year under consideration, the dividend was payable by the assessee company to its shareholders, in the facts of the present case and in the light of the provision of section 36(1)(ii) of the Act it needs to be examined whether the sum so received by the shareholder directors as bonus would have been payable as profits or dividend if not paid as bonus. The aforesaid analysis is relevant as the provisions of section 36(1)(ii) of the Act use the term any sum in the first part and such sum in the second part of the section. 10. We find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bonus of Rs. 35 lakh each to the aforesaid directors in the preceding year, which was increased to Rs. 96 lakh in the year under consideration. From the perusal of the computation of income of both the directors, forming part of the paper book from pages 65-122 for the assessment year 2015-16, we find that the directors had declared a salary of Rs. 60 lakh and a bonus of Rs. 35 lakh received by them. Thus, it is not a case wherein the bonus was received by the directors only in one year. Accordingly, we are of the considered view that the decision of the Special Bench of the Tribunal in Dalal Broacha Stock Broking (P.) Ltd. (supra) has been rendered in its own set of facts, which are completely different from the facts of the present case. Further from the financial statement of the assessee, forming part of the paper book on page 2, we find that the turnover from the sale of products increased from Rs. 39.77 crore in the assessment year 2014-15 to Rs. 61.61 crore in the assessment year 2015-16. The aforesaid facts also distinguish the present case from the facts in Dalal Broacha Stock Broking (P.) Ltd. (supra), as in that case, it was noted by the Special Bench that the steady ri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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