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2017 (11) TMI 1278 - AT - Income TaxAddition to salary and commission payment to directors - Held that:- The provisions of Section 36(1)(ii) has no applicability since the commission payment are not in proportion to the respective shareholdings and moreover, the commission has been paid only to two directors out of four directors. The assessee has asserted that the commission has been paid in proportion to the performance achieved by respective branches being controlled by them and this fact is nowhere controverted by the revenue. Undisputedly, the provisions of Section 198 of the Companies Act, 1956 could not be applied to assessee since the same was applicable only to Public Companies and not to Private Companies. Lastly, in terms of provisions of Section 40A(2)(a), the disallowance could be made only if the Assessing Officer was of opinion that such expenditure was excessive or unreasonable having regard to the fair market value of goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom. However, the revenue is unable to point out as to how the payment were excessive or unreasonable having regard to fair market value of such services. - decided against revenue Addition made on account of commission paid to sister concern - Held that:- Upon perusal of the paper book, we find that the assessee has paid the said commission @5% of net sales achieved by Bangalore Gamma Facility pursuant to agreement dated 09/04/2007, which is effective for a period of five years starting from 01/04/2007. Apparently, the commission is being paid by the assessee over past several years and which is also evident from the fact that the assessee has debited similar commission of ₹ 22,45,962/- in immediately preceding Assessment year. The assessee, in the paper book, has placed complete details of commission payment viz. agreement, month-wise calculations, ledger extracts, respective invoices & detailed calculations of the amount of commission on Page Numbers 78 to 125, which establishes the claim of the assessee. Therefore, we are of the opinion that the impugned addition qua commission is not warranted for and therefore, we delete the same.- decided against revenue
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