TMI Blog2013 (11) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... st assessee. - ITA No.3255/Del./2011, CO No.234/Del/2011 - - - Dated:- 19-10-2012 - Shri I. C. Sudhir And Shri T. S. Kapoor, JJ. For the Petitioner : Shri Vidur Puri Baldev Raj, CAs For the Respondent : Smt. Surjani Mohanty, Senior DR ORDER Per T. S. Kapoor, Accountant Member This is an appeal filed by the revenue against the order of CIT (Appeals)-XII, New Delhi dated 01.03.2011. The grounds of appeal taken by revenue read as under :- 1. On the facts and circumstances of the case the Ld. CIT (A) erred in law and merit of the case in deleting the addition of ₹ 48,16,429/- made by AO u/s 36(1)(ii) on commission paid to Directors. 2. On the facts and circumstances of the case the Ld. CIT (A) erred in law and merit of the case in deleting the addition of ₹ 15,77,102/- made by AO on account of Bad Debts Written Off. 3. The appellant craves to amend, modify, alter, add or forgo any ground of appeal at any time before or during the hearing of this appeal. The assessee has filed cross objections to the appeal filed by the revenue and the grounds taken by the assessee in cross objections are as under :- 1. The learned CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of the company and were wholly and exclusively incurred for the business of the company. However, the AO did not accept the contention made by assessee and held that no evidence was furnished to support the fact that assessee had made any efforts to recover the said debt. 3. With respect to disallowance of foreign traveling expenses, the AO had disallowed a sum equivalent to 20% of foreign travel expenses considering that there might be an element of personal expenses. 4. Dissatisfied with the order of AO, the assessee filed appeal before the CIT (A) and submitted that the AO was not justified in treating the commission as not being part of salary. Reliance was placed in the case of Gestetner Duplicators (P) Ltd vs. CIT reported in 117 ITR 1 wherein it was held that commission paid as a fixed percentage of turnover was nothing but assessable as salary. Further the definition of salary as given in section 17 of the Income tax Act was explained to highlight that salary included commission, perquisites or profits in lieu of or in addition to salary. The ld. AR further submitted before CIT (A) that in the case of ACIT vs. Bony Polymers (P) Ltd. reported in 36 SOT 456 (Delhi) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly relied upon the order of AO and argued that no evidence was furnished to support the fact that assessee made some efforts to recover the bad debts written off. 9. On the other hand, the ld. AR strongly supported the order of ld. CIT (A) and argued that there were other shareholders also and both the directors were highly qualified and had a great experience which was utilized to the achievement of higher turnover and higher profits of the company. In this respect, our attention was invited to pages 1 to 4 of paper book wherein the details of turnover and profits during the year ending 31.03.2004 to 31.03.2008 were placed. The ld. AR argued that due to efforts of these two directors, the turnover and net profits of the company continued to rise from year to year. At page 3 of paper book, the qualifications and experience of the two directors were also placed. In view of the above, the ld. AR argued that the commission was paid as a sound and prudent business decision and was a necessary business expenditure. Ld. AR also took us to pages 8 9 of paper book wherein copy of resolution passed by Board of Directors authorizing the payment of commission of directors are placed. Our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61. The case law relied upon by ld. DR had its specific facts and circumstances wherein there were only three shareholders and all three were Directors and were related to each other. Moreover, in that case, no evidence of putting any extra services was placed and the turnover and profits of that company had increased due to general improvement in stock market. In the case law relied upon by AR of AMD Metplast (P) Ltd., the facts and circumstances of which are similar to the facts of the present case. Hon ble Delhi High Court has held as under :- We fail to understand how the aforesaid observations assist and help the revenue in the factual matrix of the present case. Ashok Gupta is the managing director and in terms of the board resolution is entitled to receive commission for services rendered to the company. It is a term of employment on the basis of which he had rendered service. Accordingly, he was entitled to the said amount. Commission was treated as a part and parcel of salary and TS has been deducted. Ashok Gupta was liable to pay tax on both the salary component and the commission. Payment of dividend is made in terms of the Companies Act, 1956. Dividend has to be pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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