TaxTMI 
TaxTMI 
TaxTMI 
2012 (12) TMI 116
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....r managerial personnel. (iii) The Assessing Officer has erred in law and on the facts of the case in making addition of Rs. 106,000/- on account of expenses paid on donation. (iv) The Assessing Officer has erred in law and on the facts of the case in making addition of Rs. 7,077,719/- on account of commission paid to directors." 3. The grounds raised in assessment year 2006-07 read as under:- "(i) The Assessing Officer has erred in law and on the facts of the case in making addition of Rs. 4,466,604/- on account of commission paid to directors. (ii) The appellant may be allowed to add/amend/withdraw any grounds at the time of hearing." ITA No. 3878/Del/2010 (A.Y. 2005-06) 4. Apropos foreign exchange fluctuation. On this issue Assessing Officer observed that it is seen from the details filed by the assessee that the assessee has claimed foreign exchange fluctuation loss amounting to Rs. 454104/- on account of restatement of debtors as on 31.3.2005 and a further loss of Rs. 713213/- on account of revaluation of foreign currency held as on 31.3.2005 thereby claiming a total notional foreign exchange fluctuation loss amounting to Rs. 1167317/-. Assessing Officer opined that for....
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....o in line with the Standard Accounting policies and practices being followed by the industry at large. We find that the submissions of the assessee are cogent enough. 6.1 We further find that in the case of WoodWard Governor India P Ltd., it was held head notes "whether expression 'expenditure' as used in section 37 may, in circumstance of a particular case, covered an amount which is really a loss even though the said amount has not gone out from the pocket of assessee Held. Yes. Whether loss suffered by the assessee on account of foreign exchange difference as on the date of balance sheet is an item of expenditure u/s. 37(1) Held. Yes." Thus we find that on the anvil of the Hon'ble Apex Court decision cited above, this issue is covered in favour of the assessee and hence, we set aside the orders of the authorities below and decide the issue in favour of the assessee. 7. Apropos amount on Birthday and anniversary gift of Rs. 76,650/-. 8. In this case assessee has debited a sum of Rs. 76650/- in respect of expenses incurred on birthday and anniversary gifts given to Directors and other managerial persons. Assessing Officer opined that these expenses were of personal nature and ....
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....der:- "any sum paid to an employee as bonus or commission for services rendered, where such sum would not have not been payable to him as profits or dividend if it had not been paid as bonus or commission." 14.1 Assessing Officer observed that in this regard the two employee director also happen to be share holder of the company holding 19.80% and 12.40% of shares of the company. In this view of the matter, they are entitled to receive profit by way of dividend. Condition of section 36(1)(ii) as enumerated apply in the case of allowance of deduction as :- i) The payment should of commission for services rendered. ii) It is to an employee. iii) Sum should not otherwise be payable as dividend. From the above, Assessing Officer inferred that in this regard positive condition do exist but then negative condition is not satisfied as part of commission definitely represent, sum which would have been received as dividend had this amount not been reduced from profits as expenditure. Therefore, Assessing Officer opined only that portion of commission is an allowable deduction which otherwise would not have been received by these employees as dividend or share of profit. The amou....
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....h both the directors for determining their remuneration and commission. In the agreement, it clearly specified that commission is payable at 5% of the net profits of the company and the same shall be payable within three months of the approval of annual accounts by the shareholders. Therefore, the commission is being paid as a fixed percentage of profits and not on an adhoc basis. The aforesaid agreement was approved in the meeting of Board of Directors. The compensation for both the directors were structured in such a way that apart from getting a fixed remuneration for their services rendered, they would also be entitled to receive commission based on the profitability of the company. (In a case when there are no profits or the company is incurring losses, no such commission is payable.) Thus, the commission paid to them would clearly fall in the expression "salary". The appellant company was paying such commissions to Directors in the earlier years also and the same was duly allowed as a deduction in the assessment of the appellant company. The above commission payment was also accepted by the revenue itself of the purpose of the business of the appellant company and thus ther....