9911796707
TMI Blog2019 (3) TMI 1250X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the remaining amount is held to be unreasonable and excessive and made addition under the provisions of section 40A(2)(b). For the A.Y. 2010-11 the Assessing Officer has also held that the assessee has tried to evade dividend distribution tax under section 115-O by the way of giving the commission which is far more excessive. 4. We have gone through the records before us and the submissions of the Assessee taken before lower authorities. 5. The commission was paid to the Directors namely Shri. Rajiv Suri, Shri. Sunil Arora and Smt. Jyotsna Suri in various years. The qualifications and contributions are as under: (i) Mr. Rajive Suri-Managing Director He is the Managing Director of the assessee Company and has over 32 years of experience working in the Apparel Industry and has excellent relations with renowned international retail chains in Europe and America. The services provided by him are as under: * Guiding the assessee and providing strategic inputs for the growth and development of the business of the assessee. * Negotiation of the buying agency terms with the Overseas buyers. * Client relationship with Overseas buyers, * Service provided by Mrs. Jyotsna Suri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to show that the commission paid to the directors is unreasonable and highly excessive. The Ld Assessing Officer has wrongly and erroneously concluded on assumptions and presumptions that the commission paid to them was for the investment made by them in the assessee and not for the services rendered by them without bringing any documentary evidence on record. The Ld Assessing Officer has failed to appreciate the fact that the commission paid to the directors was for the actual services rendered by them and not for the investment made by them in the assessee. The Ld. A.O. has not held any where in the assessment orders that the two directors did not render services to the assessee". 7. In view of the aforesaid, it is submitted that if commission has been paid to an employee, in lieu of services rendered, same is deductible without any restriction. If such employee happens to be a shareholder, deduction under section 36 (1) (ii) of the Act is also allowed, if bonus or commission was paid in lieu of services rendered by the employee/director and not by way of share of profit. 7.1 It is submitted that the Ld. Assessing Officer has arbitrarily formed an opinion that the commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affect the operation of sections 352 to 354 and 356 to 360. Section 309 in The Companies Act, 1956 309. Remuneration of directors. (1) The remuneration payable to the directors of a company, including any managing or whole- time director, shall be determined, in accordance with and subject to the provisions of section 198 and this section, either by the articles of the company, or by a resolution or, if the articles so require, by a special resolution, passed by the company in general meeting 1 and the remuneration payable to any such director determined as aforesaid shall be inclusive of the remuneration payable to such director for services rendered by him in any other capacity: Provided that any remuneration for services rendered by any such director in any other capacity shall not be so included if- (a) the services rendered are of a professional nature, and (b) in the opinion of the Central Government, the director possesses the requisite qualifications for the practice of, the profession]. 9.1 The above provisions of section 198 and 309 are not applicable to the assessee company as the assessee being neither a public company nor a private company which is the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly, by invoking Rule 8D, disallowed an amount of Rs. 9,98,009/- and thereby, made an addition of Rs. 1,12,755/-. 12. During the hearing before us, Ld. DR reiterated the contents of the assessment order. 13. We find from the documents submitted before the Revenue, that as per the computation of Income filed, the assessee had made disallowance under Rule 8D, which includes the amount M/s Impulse International Pvt. Ltd. disallowance of Rs. 53,326/- under Sub-rule (2)(i), thereof, towards STT being direct expenses incurred for earning dividend income. In respect of administrative efforts, in the absence of any identifiable items, the assessee had adopted disallowance under Sub-rule (2) (iii) equal to 0.5% of "average investment" aggregating to Rs. 8,31,928/-. It was submitted the disallowance made by the Ld. AO under Rule 8D(2)(ii) was not called for. It was submitted that the Assessing Officer has taken interest expenses of Rs. 1,01,664/- under sub-rule (2)(ii) which include bank charges of Rs. 65,401/-, interest expense on car loan of Rs. 34,577/- and interest on late deposit of TDS Rs. 1,686/-. It was submitted that as none of these expenses had any relationship with earning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e indulges in intra-day trading, the Assessing Officer held the profit on trading of shares be treated as business income. 16. We find that the Ld. CIT(A) has deleted the addition on a factual ground holding that the assessee has already paid tax @30% on the amount of Rs. 9,36,208/- out of the total profits amounting to Rs. 9,64,305/-. Hence there was no need to convert the capital gains into business income. The balance amount was earned out of sale of securities and mutual funds. Since it was found by the authorities below those deliveries were duly taken and period of holding was substantial, in the absence of any contrary findings on record we hereby decline to interfere in the order of the Ld. CIT(A). Grounds relating to disallowance of Rent 17. The assessee has paid rent to M/s Impulse India (P) Ltd in respect of the premises at Plot No.41, Sector-32, "Echelon" Institutional Area, Gurgaon,. The Assessing Officer had restricted the rent at the same rate on which another premises was hired by the assessee, at JMD Pacific Square, Sector-15, Gurgaon. It was submitted that the two premises are located at different locations and the premise at Echelon Institutional Area is loca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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