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2011 (12) TMI 591 - HC - Income TaxAddition as commission and bonus to the directors - there was non-compliance and violation of the provisions of Section 36(1)(ii) - whether the respondent company was avoiding payment of dividend distribution tax @ 13.5% under Section 115O of the Act - Held that:- The Managing Director and the two Directors of the respondent company were paid bonus and commission of ₹ 77,37,965/-. The aforesaid amount as per the provisions of the Act was treated as salary paid and TDS was deducted. As per the findings recorded by the tribunal, the said Directors have paid tax in the highest tax bracket. The tribunal has rightly noticed that dividend has to be paid to all shareholders equally as per the provisions of the Companies Act, 1956. The said position cannot be disputed by the Revenue. The respondent company is a closely held company and it is accepted that all shareholders are not directors in the respondent company. It may be also noted that the directors in question, were working directors and had contributed to the earnings/profit earned by the company respondent. A non-working director or a mere shareholder does not contribute and put in efforts or labour towards earning of profits. A shareholder merely makes an investment and contributes to the share capital. It is not the number of shareholders, but the principle which matters. The tribunal has further recorded that the respondent company has been paying commission/bonus to the directors for last 30 years. It is submitted by the Revenue that with regard to the assessment years 2002- 03, 2005-06 and 2007-08, the Revenue had raised objections and disallowed commission/bonus payments made. The tribunal has decided the issue in favour of the assessee in the aforesaid assessment years.
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