Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2019 (3) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (3) TMI 1894 - AT - Income TaxDisallowance u/s. 36(1)(ii) bonus and commission paid to the directors as per agreements of appointment - CIT(A) made disallowances of bonus commission to Directors by stating that these were not linked to any specific efforts and without going through the evidence filed before him - HELD THAT - As payments in question was made to directors of the assessee company. These payments were made pursuant to agreements for payment of bonus and commission copies of which were furnished to the Revenue. The payments were made within the limit prescribed by law. CIT(A) upheld the disallowance on the ground that the agreements are generally worked. In our view, this is not a valid ground to make this disallowance. Agreements are to be understood in such a way in which both the parties to the agreement, desired and understood. Section 36(1)(ii) does not apply in this case. Hence, we allow the grounds of the assessee.
Issues:
Disallowance of bonus and commission under section 36(1)(ii) of the Income Tax Act, 1961. Analysis: The appeal was against the order of the ld. Commissioner of Income Tax (Appeals) regarding the disallowance made under section 36(1)(ii) of the Income Tax Act, 1961. The appellant contested the disallowance of ?8,32,197 as bonus and commission paid to directors, arguing that the payments were within the permissible limits under Company law and were linked to specific efforts. The CIT(A) confirmed the disallowance, stating that the payments were not linked to specific efforts and without proper evidence. Upon review, the Tribunal examined section 36(1)(ii) of the Act, which pertains to sums paid to employees as bonus or commission for services rendered. The payments in question were made to directors of the company as per agreements for bonus and commission, which were provided to the Revenue and were within legal limits. The Tribunal disagreed with the CIT(A)'s reasoning that the agreements were generally worded, emphasizing that agreements should be interpreted based on the intentions of both parties. The Tribunal concluded that section 36(1)(ii) did not apply in this case and allowed the grounds of the assessee. In the final decision, the Tribunal allowed the appeal of the assessee, overturning the disallowance of bonus and commission under section 36(1)(ii) of the Income Tax Act, 1961.
|