2014 (8) TMI 989

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....acts in brief: The assessee is a company which is engaged in the manufacturer of "Oil Field Drilling and Production Equipment", which are used for drilling Wells and to pull out oil from the wells. 3. The facts of the issue before us are brought out at Paras 3 & 4 of the assessment order, which is extracted for ready reference:- "COMMISSION PAID: During the year the assessee has paid commission of Rs. 52,22,514/- to the directors who we also shareholders of the assessee company. The details of the same as seen from the clause 8(b) of the Auditors report and Annexure VII of clause 18 of 3CD Report as under: Sh. H.L. Khushalani Rs. 32,64,071 Sh. Vivek Khushalani Rs. 13,05,628 Sh. Raksha Walia Rs. 6,52,814 Total Rs. 52,22,514 The asse....

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....ot have bee payable as profits or dividend. This means any commission paid to the shareholders forms part of the profits or dividends of the company and hence not allowable. Since in the case of the assessee company, the' sum paid as commission to the shareholders forms part of profits or dividend payable, the same cannot be allowed as deduction to the assessee company. Therefore, the commission amounting to Rs. 52,22,514/- is disallowed and added to the total income declared by the assessee. (Disallowance : Rs. 52,22,514)" 4. The First Appellate Authority at Pages 4 & 5 at Paras 5 & 6 held are as follows:- 5) I have considered the facts of the case and submissions made by the appellant. Section 36(1 )(ii) of the Act provides as unde....

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....n law and on facts in deleting the addition of Rs. 5222514/- made by the AO as paid to Directors of the company as commission even though it was not an allowable expenditure within the meaning of section 36(1)(ii) as well as section 37(1) of the I.T. Act, 1961. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal." 6. We have heard Shri Manoj Kumar Chopra, ld. Sr. Departmental Representative on behalf of the Revenue and Shri Anil Bhalla ld. counsel on behalf of the assessee. 7. On a careful consideration of the facts and circumstances of the case and perusal of the papers on record and the orders of the authorities below a....