TMI Blog2021 (8) TMI 912X X X X Extracts X X X X X X X X Extracts X X X X ..... n paid to director u/s 40(a)(ia) - AO observed that the assessee had paid commission to the directors of the assessee company on which no tax was deducted at source - HELD THAT:- We find that this issue is squarely covered by the decision of this Tribunal in assessee s own case for the Asst Year 2009-10 Section 192, unlike other TDS provision, require deduction of tax at source under the head Salaries only at the time of payment only‟ and not otherwise. The quantum or accrual of expenses is nowhere disputed by revenue. The DR has fairly conceded the above position and therefore, we find no infirmity in the order of CIT(A) and hence, this ground of the revenue is also dismissed - where commission is paid to directors as per their terms of employment for work done in their capacity as whole time directors, such commission should be treated as an incentive in addition to salary and same would not come within the purview of commission and brokerage as defined in Section 194H nor a fees for Technical services as defined in Section 194J. - Decided against revenue. Apportioning the salary or operational expenses of CEO, MD or Finance Department etc which are common to both eli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs NIL under normal provisions of the Act and book profit of ₹ 52,66,09,039/- u/s 115JB of the Act. We find that the assessee s factory premises is located at Thane and Dahej, Gujarat. The factory located at Dahej, Gujarat, is a Special Economic Zone (SEZ). The assessee had claimed deduction u/s 10AA of the Act amounting to ₹ 72,08,44,373/- against its profits from SEZ unit as is evident from page 12 of the factual paper book (FPB) containing return of income. We find from page 19 of the FPB under the heading Details of Losses to be carried forward to future years , the assessee had disclosed the business loss of the current year i.eAsst Year 2012-13 at ₹ 42,79,99,742/- which was the loss of non-eligible unit. The ld AO completed the assessment by allowing the deduction u/s 10AA of the Act restricting the same to the extent of Gross Total Income. The assessee did not object to the same before the ld CITA. But before this tribunal, for the first time, the assessee is challenging the action of the lower authorities by stating that the deduction u/s 10AA of the Act should be allowed in toto in the sum of ₹ 72,08,44,373/- on stand alone basis and the same can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stage of deduction of the profits and gains of the business of an eligible undertaking has to be made independently and, therefore, immediately after the stage of determination of its profits and gains. At that stage the aggregate of the incomes under other heads and the provisions for set off and carry forward contained in Sections 70, 72 and 74 of the Act would be premature for application. The deductions under Section 10A therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. The somewhat discordant use of the expression total income of the assessee in Section 10A has already been dealt with earlier and in the overall scenario unfolded by the provisions of Section 10A the aforesaid discord can be reconciled by understanding the expression total income of the assessee in Section 10A as 'total income of the undertaking'. 18. For the aforesaid reasons we answer the appeals and the questions arising therein, as formulated at the outset of this order, by holding that though Section 10A, as amended, is a provision for deduction, the stage of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commission/ Brokerage as defined u/s 194H of the Act. With regard to applicability of professional fees payable to directors in the form of commission and so as to make applicable the provisions of section 194J of the Act, the same would be applicable only with effect from 1.7.2012 pursuant to amendment in section 194J and hence not applicable for the year under consideration. It was pointed out that in any case, no disallowance u/s 40(a)(ia) of the Act could be made in the year under consideration. 5.2. We find that the ld CITA had duly appreciated these contentions of the assesseeand deleted the disallowance u/s 40(a)(ia) of the Act in respect of Commission paid to Chairman Managing Director, Executive Director and other Directors of the assessee company. Aggrieved, the revenue is in appeal before us. 5.3. We find that this issue is squarely covered by the decision of this Tribunal in assessee s own case for the Asst Year 2009-10 in ITA No. 7408/Mum/2012 and CO No. 82/Mum/2014 dated 21.10.2016, wherein it was held as under:- 4. The second issue is qua disallowance u/s. 40(a)(ia) for an amount of ₹ 1,08,00,000/-. AO noted that assessee made the provision for comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erms of employment for work done in their capacity as whole time directors, such commission should be treated as an incentive in addition to salary and same would not come within the purview of commission and brokerage as defined in Section 194H nor a fees for Technical services as defined in Section 194J. Similar view has been expressed in Pune Tribunal bench decision in Nashik Metals Pvt. Ltd Vs. ITO 50 Taxmann.com 185. 5.4. Respectfully following the aforesaid decision, we do not find any infirmity in the order of the ld CITA granting relief to the assessee. Accordingly, the Ground Nos. 1 2 raised by the revenue are dismissed. 6. The next issue to be decided in this appeal is as to whether the ld CITA was justified in deleting the addition made by the ld AO by apportioning the salary or operational expenses of CEO, MD or Finance Department etc which are common to both eligible and non-eligible undertakings of the assessee company. 6.1. We have heard the rival submissions and perused the materials available on record. We find that the assessee had claimed deduction u/s 10AA of the Act for the profits derived by its from Dahej Unit in Gujarat which is a SEZ Unit. Duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... functions in both the units separately and their personnel, operational and other expenses are accounted in the concerned units for which they are related according to their roles and responsibility. The assessee also placed reliance on the decisions of the Co-ordinate Bench of this Tribunal in the case of Aditya Birla Nuvo Ltd vs ACIT reported in 68 SOT 403 (Mumbai Trib) ; Grasim Industries Ltd in ITA No. 5630/M/2002 and 1865/M/2003 and in the case of Procter and Gamble Hygiene and Healthcare ltd in ITA No. 1499/M/2005 and ITA No. 1500/M/2005 wherein it was held that the claim of deduction u/s 80IB of the Act should not be reduced by allocating head office expesnes to profits derived from the eligible units. All these contentions were duly appreciated by the ld CITA which prompted him to delete the disallowance made by the ld AO by reducing the claim of deduction u/s 10AA of the Act. Aggrieved, the revenue is in appeal before us. 6.3. We find that this tribunal in ITA Nos. 838/M/2016 (Assessee Appeal) and ITA Nos. 481 5315/M/2016 (Department Appeals) for the Asst Year 2011-12 dated 13.2.2019 had remanded the impugned issue back to the file of ld CITA for denovo adjudication. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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