Appeal dismissed, cross objection partly allowed. Commission disallowance upheld, foreign travel expenses justified, excessive HRA remanded.

The Revenue's appeal was dismissed, and the cross objection of the assessee was partly allowed for statistical purposes. The ITAT upheld the CIT(A)'s decision regarding the disallowance of commission paid to the Managing Director under Section 36(1)(ii) of the Income Tax Act, 1961, based on previous judgments. The disallowance of foreign travel expenses of directors was not justified as there was no family travel, and the excessive HRA paid to the Managing Director was remanded back to the Assessing Officer for further consideration.

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Issues:
1. Disallowance of commission paid to Managing Director under section 36(1)(ii) of the Income Tax Act, 1961.
2. Disallowance of foreign travel expenses of directors as personal in nature.
3. Disallowance of excessive House Rent Allowance (HRA) paid to Managing Director.

Analysis:

Issue 1: Disallowance of Commission Paid to Managing Director
The appeal and cross objection were filed against the order passed by CIT(A) for Assessment Year 2011-12. The Assessing Officer disallowed the claim of commission paid to the directors under Section 36(1)(ii) of the Income Tax Act, 1961, stating that it was diverted profit that should have been paid as dividend. The CIT(A) partly allowed the appeal of the assessee. The Revenue appealed against this decision. The ITAT upheld the CIT(A)'s decision based on previous judgments in favor of the assessee for other assessment years, stating that the disallowance made on account of commission to Managing Director was correctly deleted by the ITAT in previous cases.

Issue 2: Disallowance of Foreign Travel Expenses
The Assessing Officer made an ad-hoc disallowance of foreign travel expenses of directors as personal in nature. The CIT(A) partly allowed this disallowance based on the ITAT's decision in the assessee's own case for a previous assessment year. The ITAT considered that in the present assessment year, there was no travel with the family, and thus, the disallowance was not justified. The cross objection filed by the assessee on this issue was allowed.

Issue 3: Disallowance of Excessive HRA Paid to Managing Director
The Assessing Officer disallowed a portion of the HRA paid to the Managing Director as excessive. The CIT(A) upheld this disallowance. However, the ITAT set aside this issue to the Assessing Officer to verify if the HRA paid to the directors should be considered as perquisites in their hands. The ITAT directed the Assessing Officer to decide the issue after providing the assessee with an opportunity of hearing following principles of natural justice. The cross objection filed by the assessee on this issue was partly allowed for statistical purposes.

In conclusion, the appeal of the Revenue was dismissed, and the cross objection of the assessee was partly allowed for statistical purposes. The ITAT's decision was based on previous judgments and the specific circumstances of the case regarding the disallowed expenses and allowances.

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