TMI Blog2020 (8) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed in the past by the AO himself in orders passed in scrutiny proceedings u/s 143(3). If directors in terms of Board resolution are entitled to receive commission for rendering services to the company and if it was in terms of employment on the basis of which they have been rendering services, then such remuneration/commission is part and parcel of salary. It is also not disputed that TDS has been deducted on such commission as salary. Otherwise also, the payment of dividend is made in terms of Companies Act, 1956 which has to be paid to all the shareholders equally and dividend is basically a return of investment and not salary or part thereof. As decided in AMD METPLAST P. LTD.[ 2011 (12) TMI 320 - DELHI HIGH COURT] payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iate that the shareholder director was entitled to dividend in view of accumulated profit available and the commission so paid is clearly prohibited by the provisions of section 36(l)(ii) of Income-tax Act, 1961. 2. The facts in brief are that the assessee-company is engaged in the business of manufacturing of software sophisticated dynamic balancing equipment different in sizes and performance capabilities. Ld. Assessing Officer from the perusal of the tax audit report, noted that assessee has paid commission to its directors for sums aggregating to ₹ 1,92,80,954/-. Ld. Assessing Officer held that in view of said provision of section 36(1)(ii), employees who would otherwise be entitled to receive profit or dividend by virtue of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Public Relations for increase the visibility of company in public at large. ■ Conduct the seminar on Balancing Machine on behalf of company. ■ Conduct Research on development of business and products. ■ Promote the success of the company for the benefit of its members. ■ Supervisor of office staff and technical assistance (including conducting staff evaluations) In lieu of said duties and functions assessee-company had agreed to pay, additional compensation apart from their regular compensation, based on turnover in the following manner:- Starting from Financial year 2006-07 till the service rendered by the director, the Full Time Working Technical Director shall be paid a Commission based on Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2012] 250 CTR 240 (Del). Ld. CIT (A) looking to the entire facts, past history and the law laid down by the Hon'ble Jurisdictional High Court held that the facts of the case are identical to the pronouncement of Hon'ble Jurisdictional High court and commission is allowable. 6. Ld. DR relied upon the observation of the Assessing Officer stated that in terms of Section 36(1)(ii) any kind of commission paid to the Directors who was a shareholder cannot be allowed where they are entitled for dividend and profits of the company. 7. On the other hand, ld. counsel for the assessee has strongly relied upon the order of the Ld. CIT (A) and submitted that this issue is squarely covered by the judgment of Hon'ble High Court (supra). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in view of section 36(1)(ii) of the Income-tax Act, 1961, and the said amount can be only allowed under section 36(1)(ii) if dividend of ₹ 25,00,000 could not have been paid to Mr. Ashok Gupta. Their Lordships after considering the various judgments and the position of law have observed and held as under: 9. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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