TMI Blog2015 (1) TMI 557X X X X Extracts X X X X X X X X Extracts X X X X ..... the current year. Moreover, nowhere it was mentioned in the valuation report regarding valuation of ₹ 3000/ - per square yard in the cur rent year. Normally in such a situation the matter should have been referred to the valuation cell but Assessing Officer has referred the mater to the PSIDC which is a government agency responsible for allotting the industrial plots in Mohali area where the plot of the assessee was also located. Agency itself has allotted a plot of 11245 square yard on 22.7.1981 @ ₹ 46/ - per square yard the value which was required to be found is on 1.4.1981 and the plot has been allotted by PSIEC on1 July 1981 and the period comes quite in proximity to the date of 1.4.1981 and therefore, in our opinion the Assessing Officer could have applied this rate easily. The Assessing Officer has been more than reasonable in further increasing this rate by three times to as certain the market value, therefore, the valuation as adopted by Assessing Officer seems to be correct. Therefore, we set aside the order of Ld. CIT(A) and restore that of Assessing Officer - Decided against assessee. - ITA No. 549/Chd/2010 - - - Dated:- 9-12-2014 - Bhavnesh Saini, JM An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided to award the directors for their exemplary work done by them with utmost care, diligence and skill which has resulted into good profit to the company. Accordingly, the commission has been paid to the directors after deduction of TDS as applicable. The director has considered this as their income and has paid income tax @ 30% on this payment. In view of this, there is no loss of tax to the revenue. 2. The company has considered ₹ 12,84,488/ - as short term capital gain while computing the tax liability and has paid normal tax @ 30/ - as applicable to the company. There are some error while filing the required columns in the returns however the tax liability has been worked out correctly in the return itself which may please be verified. 3. The plot which has been sold out was acquired by the company before 01.04.1981 hence the fair market value as on 01.04.1981 has been adopted in accordance with section 55(2) (the copy of valuation done by the approved valuer is already enclosed for reference). 4. The transfer expenses amounting to ₹ 52,47,600/ - has been deducted while computing the capital gain. The details of expenses are as under: - a) ₹ 48,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and in this regard he relied on the decision of Hon'ble Supreme Court in the case of Swadeshi Cotton Mills Co. Ltd, v CIT 63 ITR 57. Further, companies mainly owned by Shri Jagmohan Singh and his wife and other family relatives and therefore, resolution passed is only a self serving document and reliance cannot be placed on the same. In this regard he relied on the decision of Hon'ble Supreme Court in the case of CIT v Durga Prasad 82 ITR 540 There is no evidence on record to show that extra effort has been made by the director in ar ranging the customers for the sale of property. He also submitted that Normally in case of property transaction, a brokerage of 1 or 2% is paid whereas in this case brokerage has been paid @ 12% which itself shows that it is a way of passing of money from the company to evade tax. He also submitted that it is settled law that income has to be assessed in the hands of correct persons and in this regard he referred to the decision of Hon'ble Supreme Court in the case of ITO v. Ch. Atchaiah [1996] 218 ITR 239 Therefore, even if entries have been passed for the commission the income still belongs to the assessee company. While concludin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 Jagmohan Singh ( HUF) Karta of DR Jamiat Singh F/o B.M. Singh 341 Total 8695 Thus out of total of 9000 shares, 8695 shares are held by the family of Shri Birinder Mohan Singh, which makes it clear that this family hold the shares to the extent of more than 96%. Now the commission has been paid of ₹ 24 lakhs each of Shri Birinder Mohan Singh or Mrs Kiran B.M. Singh w/o Birinder Mohan Singh i.e. husband and the wife both of whom are directors of the company. Being a substantial shareholder to the extent of more than 96%, it was very easy to pass a resolution and appropriate funds of the company by the family members. Therefore, the Board resolution clearly is a self serving document and cannot be relied on for making the claim for payment of commission. 11. It is further to be noted that Shri Birinder Mohan Singh was paid salary of ₹ 3 lakhs and Mrs. Kiran B.M. Singh w/o Birinder Mohan Singh was also paid remuneration of ₹ 2,40,000/ -. It is settled position of law that Directors occupy the position of trust with respect to the company. Thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lary, they were duty bound to various acts on behalf of the company. In any case no evidence has been brought on record to show what extra effort they have made to sell the property. For selling of property, various advertisements are required to be placed in newspapers or some traveling was required to meet a particular person but no evidence of this kind is produced before Assessing Officer or CIT(A) or before us. Similarly, passing the resolution would not help the case of the assessee. In any case merely passing of the resolution as observed by the Hon'ble Supreme Court in the case of Swadeshi Cotton Mills Co. Ltd, v CIT (supra) will not make the payment of commission as allowable business expenditure. We need to remember that it was very easy for the director to pass resolution because of the majority share holdings to make the directors entitled for receipt of commission. 13. We also need to appreciate the contention of Ld. DR that commission has been paid @ 12% whereas the normal rates are 1 to 2% which itself shows that commission has been passed on just to save the tax in the hands of the assessee. 14. It was also contended that directors have al ready paid tax b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment year 2006-07-Whether any expenditure on account of payment of commission to an employee will be allowable as deduction under provisions of section 36(1)(ii) irrespective of fact whether employee is a shareholder or not or whether commission has been paid for some extra services or for some services, subject to condition that payment is not in lieu of dividend Held, yes- Whether however, in case extra services have been rendered for payment of commission, it will be one of relevant factors to consider while deciding whether case is covered by exception provided in section 36(1)(ii), i.e., whether payment of commission is in lieu of dividend-Held, yes-Whether word 'payable' used in section 36(1)(ii) means that dividend would have been declared by any reasonable management on facts and circumstances of case, considering profitability and other relevant factors and become payable to shareholders Held, yes-Whether, therefore, after considering entirety of facts and circumstances of case, if a reasonable conclusion can be drawn that dividend was payable by assessee company and it instead of paying dividend had paid commission to its employee-shareholder, such paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Commissioner of Income-tax Vs Career Launcher India Ltd. therefore, the ratio laid down in both these cases are not applicable. In view of the above discussions, we are of the opinion that Ld. CIT(A) has misdirected himself in allowing the relief by simply observing that there is no bar for any person to act as a property broker. He has totally missed the fact that the persons who got commission were executive directors of the company who we al ready in receipt of the salary and were duty bound to per form the functions which were assigned to them with the remuneration paid to them. Therefore, we set aside his order and restore that of Assessing Officer. 19. Ground No.2: After hearing both the parties we find the plot situated in Industrial Area, Phase-I, Mohali which was sold during the year was purchased prior to 1981. The assessee filed a valuation report from the approved valuer for estimating the fair market value as on 1.4.1981. The valuer mentioned in the valuation report that present rate was ₹ 3000/- per square yard and thereafter he applied the cost inflation index in the reverse order and found value at ₹ 612/- per square yard. Thereafter, he ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue as informed by PSIEC by three times i.e. 46 X 3 and adopted rate for 138/ - per square yard as fair market value as on 1.4.1981 and al lowed the indexation accordingly. 21. On appeal, the submissions made before Assessing Officer were reiterated and reliance was placed on some case laws. It was further emphasized that valuation report was furnished which was issued by a registered valuer and therefore, same should be adopted. Further, since valuation was not refereed to DVO, therefore, there was no basis for rejection of the valuer report. The Ld. CIT(A) accepted these submissions and observed that since matter was not referred to DVO the valuation given by registered valuer should have been adopted. 22. Before us Ld. DR referred to the contents of the assessment order and submitted that Assessing Officer has rightly rejected the method of reverse indexation. The Special Bench of the Tribunal in case of Hiralal Lokchandani v ITO 106 ITD 45 has clearly held that reverse indexation method is not correct method for valuation. Similarly, the Hon'ble Calcutta High Court in the case of Jagat Mohan Kapur v Wealth Tax Officer 211 ITR 721 has clearly opined that cost inflatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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