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2018 (8) TMI 384 - HC - Income TaxPayment of bonus to shareholder employees / directors - allowability u/s 36(1)(ii) - Distribution of profit in lieu of dividend - Held that:- The payment of bonus made to the employee directors, it is clear that all the four employee directors own identical number of shares i.e. 12.20% aggregating to 49% shares in respect of company. Nevertheless the bonus which has been paid to each of them is different. This is evidence of the fact that the payment of bonus was a performance based payment and entirely dependent on the performance of the employee. This also explains the fact that employee directors were paid at a much higher rate than the other employees of the company as the payment of the bonus is performance based and not designation based. Thus the payment made to the four employee directors of the company is not a payment made in lieu of dividend as in fact found on facts by the Tribunal. No substantial question of law. TPA - M/s. ICSL is not a comparable to the assessee company under Section 10B(2)(i) and (ii)? - Held that:- Tribunal on consideration of all the facts before it has come to the conclusion that ICSL providing services of a merchant/investment banker. This finding of the Tribunal can only be said to be perverse if some material/evidence is placed on record which would establish that the conclusion reached by the Tribunal could not have been reached in the face of the material/evidence which is on record. Whether comparables can be rejected on the ground that the comparables have exceptionally high profit margin as compared to the assessee in transfer pricing analysis? - Held that:- This issue does not arise from the impugned order of the Tribunal. The impugned order of the Tribunal excluded ICSL from the list of comparables on the basis of functional test viz. ICSL carries out the function of merchant/investment banker which is different from a function carried out by the assessee of investment advisory. The exclusion of ICSL was not on the basis of a abnormally high profit margin so as to be not comparable with the respondent assessee. The question as proposed is academic in the present facts. Appeal dismissed.
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