Tribunal allows deduction for Director's commission, instructs AO to delete disallowance.

The Tribunal directed the ld AO to delete the disallowance of Director's commission as it was found eligible for deduction. The appeal of the assessee was allowed for statistical purposes.

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Issues involved:
The appeal in ITA No. 4819/Del/2017 for AY 2009-10 regarding the disallowance of Director's commission of profits.

Issue 1: Disallowance of Director's commission

The only issue to be decided was whether the ld CIT(A) was justified in confirming the disallowance of Director's commission of profits amounting to Rs. 32,47,750/- in the instant case.

The assessee had filed its return of income for AY 2009-10 showing income of Rs. 3,18,29,604/-. The ld AO observed that the assessee had paid a sum of Rs. 32,74,750/- as commission to the Managing Director, which was paid out of profits and invoked section 36(1)(ii) of the Act to disallow the commission. The ld CIT(A) upheld this action.

The commission was paid to Mr. Feroz, a Director of the company, based on the approval of shareholders in a general meeting. It was claimed as a deduction in AY 2009-10 but was actually paid in AY 2010-11. The provisions of section 36(1)(ii) of the Act were found not applicable as the decision to declare dividend required the consent of another major shareholder, Mr. Mohit. Judicial precedents were cited to support the eligibility of commission paid to Directors as a deduction.

Decision: The Tribunal directed the ld AO to delete the disallowance of commission, as it was found eligible for deduction. Ground No. 1 raised by the assessee was allowed.

Issue 2: Appropriate credit for prepaid taxes and adjustment of refunds

The second ground raised by the assessee was regarding seeking appropriate credit for prepaid taxes and adjustment of refunds due to the assessee. The Tribunal directed the ld AO to decide this issue in accordance with the law.

Decision: Ground No. 2 of the assessee was allowed for statistical purposes.

General Grounds:
Ground Nos. 3 and 4 raised by the assessee were of a general nature and did not require specific adjudication.

In conclusion, the appeal of the assessee was allowed for statistical purposes.

Order pronounced in the open court on 05/09/2023.

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