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2019 (4) TMI 701 - AT - Income TaxAddition on account of bonus paid to the Director employee - addition u/s 115-O considering the same as dividend - liability to pay the tax @ 15% on account of dividend distributed by it to its shareholders - whether provisions contained u/s 115-O being non-obstante provisions override the general provisions of section 36(1)(ii)? - HELD THAT:- As decided in NEW SILK ROUTE ADVISORS PRIVATE LTD. VERSUS DCIT-7(1), MUMBAI [2015 (4) TMI 795 - ITAT MUMBAI] Payment of bonus to shareholder-employees had resulted in payment of more taxes in comparison to tax payable had the same amount been paid as dividend to shareholders. So, it could not be held that it was a device to evade taxes. Not only this, it was found that the shareholders were professionally highly qualified. Payment of bonus was a business decision and till it was not proved that same was not paid actually, it could not be disallowed. Hon’ble Delhi High Court in case of Chrys Capital [2015 (4) TMI 949 - DELHI HIGH COURT] held that when shareholders also held directorial position in the assessee’s company, the deduction claimed by the assessee u/s 36 (1)(ii) of the Act in respect of bonus paid to its shareholder employees was allowable. We are of the considered view that AO as well as ld. CIT (A) have erred in making addition on account of bonus paid to the Director employee which is ordered to be deleted. Disallowance of legal and consultancy charges - assessee claimed bogus expenses - HELD THAT:- When the entire case of the Revenue in treating legal and consultancy service charges as bogus hinges upon statement of Shri Ravinder Kumar Shukla, ex-Director of the assessee company, his statement cannot be read into evidence against the assessee unless right to cross-examination of Shri Ravinder Kumar Shukla is not provided to the assessee. Assessee claimed to have paid service tax on the amount paid to M/s. Rockhard Infrastructure Pvt. Ltd. and has also filed no TDS certificate issued by the Income-tax Department to M/s. Rockhard Infrastructure Pvt. Ltd., which fact prima facie goes to prove that the payment was made. So, in these circumstances, we deem it necessary to set aside this issue to the AO who shall provide adequate opportunity of being heard to the assessee by providing the right to cross examine Shri Ravinder Kumar Shukla and to have copies of the documents/ statements relied upon by the AO. Consequently, grounds determined in favour of the assessee for statistical purposes.
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