TaxTMI 
TaxTMI 
2012 (7) TMI 788
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder:- 1. That the CIT(A) -XV, New Delhi has grossly erred on facts and in circumstances of the case and in law in holding the bonus and commission payment of Rs. 5,17,644/- to the Managing Director as payment in lieu of dividend without appreciating that such payment is for services rendered as per terms of appointment as Executive/Managing Director of the appellant company. 2. That the appellant reserves the right to add, alter or amend any other ground at the time of hearing. 2. The grounds for the assessment year 2007-08 and 2008-09 are same except the change in figure which is Rs.7,40,726/- for assessment year 2007-08 and Rs. 9,03,052/- for assessment year 2008-09. These appeals were heard together. They are being disposed off....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... From clause 16 of Form 3CD of the Audit Report itself it is very clear that the bonus and commission to the Managing Director is not allowable u/s 36(1)(ii) of the Income Tax Act, 1961 . Thus, bonus paid as commission to Director was otherwise payable to him as profit or dividend and was thus not allowable u/s 36(1)(ii) of the Income Tax Act, 1961 . The details filed by the assessee show that the bonus and commission has been paid to Shri Kapil Goswami, Managing Director who was having a shareholding of 17.5.% in the company. The aforesaid details show that the bonus and commission have been paid to the director who was both an employee as well as a shareholder. Section 36(1)(ii) has been specially inserted to ensure that companies do ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o.16 issued by the company to the Managing Director. 5. That section 36(1)(ii) does not mention about the disallowance of such payment to the Managing Director and moreover the Assessing Officer has not disputed the reasonableness and commercial expediency of such expenses. 6. The Ld Assessing Officer had disallowed the expenses on the basis of text of clause 16 of Form 3CD of audit report which according to Assessing Officer had stated that bonus and commission for Managing Director is not allowable u/s 36(1)(ii) of the Income Tax Act, 1961 . However, thus is not correct as against clause 16(a) of Form 3CD of Tax audit report, the auditor has clearly mentioned nil amount. 7. That Managing Director has rendered effective and effici....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., I am in agreement with the views of the Assessing Officer regarding the disallowance made on account of payments of commission and bonus to the Managing Director. This ground of appeal is dismissed." 6. Aggrieved, the assessee filed appeal before this Tribunal. 7. The Ld AR argued before us that the bonus and commission paid to Managing Director was a regular business expenditure of the company and the assessee has been paying it regularly for the last 20 years. He further argued that Shri Goswami, the Managing Director of the company is receiving commission and bonus as a professional and the amount of commission and bonus is part of salary paid to him. In this respect, he took us to page 102 to 107 where copy of IT Return a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dgment of Hon'ble jurisdictional High Court, the appeal of the assessee should also be allowed. 10. The Ld DR, on the other hand, argued that assessee has not made any commercial expediency and the amount of commission is not reasonable. The Ld AR in his rejoinder submitted that there is no question of reasonableness as the commission has been paid at the same percentage of profit as was being paid in earlier years. 11. We have heard the rival submissions of both the parties and have gone through the material available on record. We have also gone through the judgment of Hon'ble Delhi High Court in the case of AMD Mertplast Ltd. reported in 341 ITR 563. For assessment year 2005-06, the ITAT had followed the case of AMD Metplast Ltd. (sup....