TMI Blog2019 (5) TMI 1888X X X X Extracts X X X X X X X X Extracts X X X X ..... ution 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 TDS has been deducted. Managing Director 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 paid to shareholders equally. This position cannot be disputed by the Revenue. Dividend is a return on investment and not salary or part thereof. Herein the consideration in the form of commission which was paid was for services rendered by him as per terms of appointment as a Managing Director. Thus addition made by the AD u/s 36 (1) (ii) is hereby deleted. - Decided in favour of assessee. - I.T.A.Nos.3124 to 3126/Chny/2017 - - - Dated:- 8-5-2019 - SHRI GEORGE MATHAN AND SHRI A. MOHAN ALANKAMONY, JJ. Appellants by : Shri AR.V. Sreenivasan, JCIT Respondent by : Ms. S. Vidya, CA ORDER A. Mohan Alankamony, J. These appeals by the Revenue are directed against the orders passed by the learned Commissioner of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,47,37,892/-, ₹ 4,22,13,104/- ₹ 3,18,67,156/- for the assessment years 2012-13, 2013-14 2014-15 respectively. 4.1 Before the Ld.CIT(A), the Ld.AR had made the following submissions:- (i) The assessee had computed the expenditure incurred for earning exempt income as ₹ 53,950/-, ₹ 1,08,805/- ₹ 8,23,331/- for the assessment years 2012-13, 2013-14 2014-15 respectively and offered the same for disallowance. (ii) However the Ld.AO has simply rejected the computation made by the assessee without examining the actual expenditure incurred by the assessee for earning exempt income and worked out the disallowance at ₹ 4,47,37,892/-, ₹ 4,22,13,104/- ₹ 3,18,67,156/- for the assessment years 2012-13, 2013-14 2014-15 respectively by invoking Rule 8D of the Rules. (iii) The entire investment was made out of the non-interest bearing funds of the assessee company as its equity share capital, general reserves, and surplus from P L account exceeded the total investment which earns exempt income. Therefore no interest expenses could be attributed towards the investment made for earning exempt income. 4.2 The Ld.CIT(A) after co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO's action is legally not tenable. In this regard reliance is placed on the decision of the Hon'ble High Court of Delhi in the case of CIT Vs Hero Management Services Pvt. Ltd reported in 360 ITR 0068 (Delhi) wherein it has been observed as under: Further to invoke Rule 8D, the Assessing Officer has to first record a finding that he was not satisfied with the correctness of the claim for expenditure made by the assessee in relation to income, which did not form part of the total income under the Act. No such satisfaction has been recorded by the Assessing Officer. Based on the above cited discussion the addition made by the AO u/s 14A is hereby deleted. Accordingly, the grounds raised in this regard are allowed. Further for the assessment year 2013-14 2014-15, the Ld.CIT(A) held the issue in favour of the assessee by observing as follows:- 7.3 Ground relating disallowance u/s.14A rwr 8D: The AO invoking the above said provisions made a disallowance for both the years. Contesting the disallowance, the appellant submitted that it had earned a dividend of ₹ 2,65,815/- for AY 2013- 14 and ₹ 1,19,410/- for AY 2014-15. The appellant company had di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the provisions of Section 309 of the Companies Act, 1956, one percent of the net profit is to be paid to the Managing Director as commission. (ii) The commission of 1% on net profit of the company could be determined only after the completion of the finalization of the accounts and audit of the assessee company s account whereby the net profit is finally arrived. (iii) The payment of commission is treated as salary paid to Managing Director of the company and tax is deducted at source in accordance with Section 192 of the Act. However the Ld.AO rejected the submissions made by the assessee and opined that the provisions of Section 36(1)(ii) of the Act would be attracted towards the commission payment made by the assessee company to its Director and accordingly disallowed the same. 5.1 On appeal, the Ld.CIT(A) for the assessment years 2012- 13, 2013-14 2014-15 deleted the addition by relying on the decision of the Hon ble Delhi High court in the case AMD Metplast Pvt. Ltd., vs. DCIT reported in 341 ITR 563 wherein it was held as follows:- 6. b) Issue of disallowance u/s. 36(1)(ii) of ₹ 26,25,530/-: On going through the submissions made by the appellant it is s ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
