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2011 (6) TMI 251 - AT - Income TaxDisallowance of payment of commission to the three working directors / share holder employees - It was pointed out that in Assessment Year 2004-05, disallowance had been made by the Assessing Officer under section 40A(2)(b) holding the commission payment excessive compared to market value but the addition had been deleted by the Tribunal - Held that:- The provisions of section 36(1)(ii) cover only the case of expenditure on account of bonus or commission paid to an employee. Any expenditure incurred on account of payment of commission to a person who is not an employee is not covered by the said provision. Such cases of expenditure on account of commission to non employees will be governed by the provisions of section 37(1). - the payment of ₹ 1.05 crores shown as commission paid to shareholder employees in Assessment Year 2000-01 when there was exceptional profit was nothing but dividend Regarding deduction u/s 37(1) - It was also argued that commission paid for any extra services rendered by the share holder employees will be covered by the provisions of section 37(1) which allows deduction on account of any expenditure incurred wholly and exclusively for the purpose of business subject to the conditions mentioned in the section - payment of commission of ₹ 1.20 crores to the three working directors was in lieu of dividend and the same is not allowable as deduction under section 36(1)(ii).
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