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2014 (12) TMI 209 - AT - Income TaxDisallowance u/s 40(a)(ia) – TDS not deducted on commission paid to directors - Held that:- The assessee has paid Commission to the 4 directors on which no TDS has been deducted for which the AO disallowed the same u/s.40(a)(ia) which has been upheld by the CIT(A) – the contention of the assessee is accepted that the assessee has made payment to its employee directors not for selling any goods or articles but for managing the affairs of the assessee company - The amount is not paid for selling any particular goods/articles and therefore the amount paid by the assessee company to its directors does not come within the ambit of provisions of section 194H - Merely because the directors have shown the said commission income in their hands as “income from other sources”, it cannot be a ground to exclude the commission paid to the directors from the ambit of salary - the commission paid to the directors should be treated as salary in their hands and treated accordingly and the provisions of section 40(a)(ia) are not applicable. Relying upon Jahangir Biri Factory (P) Limited. Versus Deputy Commissioner Of Income-Tax [2009 (3) TMI 215 - ITAT CALCUTTA-C] – wherein it has been held that the commission paid to directors as per terms of employment for the work done in their capacity as whole time directors is to be treated as incentive in addition to salary etc. and did not come within the purview of commission and brokerage as defined in section 194H or fee for professional or technical services as defined in section 194J and therefore the same cannot be disallowed u/s.40(a)(ia) - one of the director Shri Mahendrapal Tank has claimed an expenditure against the receipt of commission - once the commission paid to the directors is held as part of salary income, the Director is not entitled to claim any expenditure from such salary income –Decided partly in favour of assessee.
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