Tribunal allows deduction of director bonus & denies extra depreciation on computer peripherals

The Tribunal upheld the deletion of the addition of bonus paid to directors, finding it fully deductible under section 36(1)(ii) of the Act as the directors' shareholding was minimal and they had paid tax on the bonus. The appeal by the Revenue was not allowed. Additionally, the Tribunal upheld the deletion of the extra depreciation claimed on computer peripherals, agreeing with the ld. CIT (A) that peripherals were integral to computers and eligible for depreciation at 60%. The appeal on this ground was dismissed.

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Issues:
1. Deletion of addition of bonus paid to directors.
2. Deletion of addition of extra depreciation claimed on computer peripherals.

Deletion of Addition of Bonus Paid to Directors:
The appeal by the Revenue challenged the deletion of an addition of &8377; 17,55,103/- on account of bonus paid to the directors of the company for the assessment year 2008-09. The AO had added this amount as bonus paid to directors who held more than 50% of the company's shareholding, suspecting it to be a disguised dividend. However, the ld. CIT (A) noted that the directors' shareholding was around 8% on a consolidated basis with no separate shareholding exceeding 3%. The directors were also paid remuneration of &8377; 1.06 crores in addition to the bonus. The ld. CIT (A) found that all employees, including directors, were paid bonuses and that the directors had paid tax on the bonus at the maximum marginal rate. Consequently, the Tribunal held that the bonus paid to directors was fully deductible u/s 36(1)(ii) of the Act, as there was no loss to the revenue. The appeal ground was not allowed.

Deletion of Addition of Extra Depreciation on Computer Peripherals:
The second ground of appeal was against the deletion of an addition of &8377; 190972/- claimed as extra depreciation on computer peripherals. The assessee claimed depreciation at 60% on computers, justifying the higher rate for peripherals based on precedents. However, the AO disallowed the excess depreciation, treating computer peripherals as normal plant and machinery. The ld. CIT (A) overturned this decision, citing precedents that peripherals like printers, scanners, and NT Server are integral to computers and eligible for depreciation at 60%. The Tribunal upheld the ld. CIT (A)'s decision based on the precedents cited, and the appeal was dismissed.

Separate Judgement:
No separate judgement was delivered by the judges in this case.

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