TaxTMI 
TaxTMI 
2014 (6) TMI 46
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....ecting the petitioner's application under Section 254(2) of the Income Tax Act, 1961 (hereinafter referred to as the 'Act'), for rectification of the order dated 20.04.2012 passed by the Tribunal in ITA No. 1642/Del/2010. By the said order dated 20.04.2012, the Tribunal had rejected the petitioner's appeal against the orders passed by the CIT (Appeals), affirming the disallowance of commission paid (by the petitioner) to its Managing Director and another Director (hereinafter referred to as the 'Directors'). 2. The petitioner's grievance is that the Assessing Officer has disallowed the commission paid by it to its Directors in consideration of the personal guarantees furnished by them to a bank for facilitating the loan provided to the p....
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....flected as income in their respective returns. 3.3 The Assessing Officer's order, for the Assessment Year 2006-07, on 31.12.2008 held that by virtue of Sections 36(1)(ii) of the Act, bonus or commission paid to an employee was allowable as deduction, provided the same would not have been payable as profits or dividends had such commission not been paid. The Assessing Officer further concluded that in the event such commission had not been paid by the petitioner, it would have been distributable as dividends. The Assessing Officer further observed that by paying commission to the Directors, the assessee was avoiding 15% dividend distribution tax under Section 115O of the Act. 3.4 The assessee preferred an appeal before CIT (Appeals) ch....
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.... as consideration for standing as a surety is allowable as an expense under the Act, we deem it appropriate to consider the question in these proceedings. 5. It is not in dispute that the requisite resolution was passed by the assessee for paying the guarantee commissions to the Directors. It is also not in dispute that the Directors provided the personal guarantees and stood as surety for the financial assistance availed of by the assessee. The contention that personal guarantees of the Directors were insisted upon by the State Bank of India and were necessary for availing of the facilities, is also not contested. In view of the aforesaid factual background we find that the issues that needs to be addressed is whether the Directors have....
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....nditure undertaken by an assessee. The Assessing Officer has only to determine whether the transactions are genuine and real. In the given circumstances, in our view it cannot be contended that the transactions involving payment of commissions to the Directors are unreal or not genuine. 7. The next aspect that has to be considered is whether payment of such commissions are liable to be disallowed as an expense by virtue of Section 36(1)(ii) of the Act. At this stage it is necessary to refer the Section 36(1)(ii) of the Act, which reads as under:- "any sum paid to an employee as bonus or commission for services rendered, where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commiss....