TaxTMI 
TaxTMI 
2017 (10) TMI 1248
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....,00,000/- made u/s 37(1)(iii) of the IT Act in respect of commission paid to Managing Director and Working Director?" 3. Briefly stated facts are that out of four directors of the assessee company, two are working directors, who were paid remuneration including salary and commission subject to overall limits prescribed under the Companies Act. The total remuneration included an amount of Rs. 84,00,000/- commission to these two directors. According to AO commission was paid to directors who were also shareholders in the company and hence, the commission was otherwise payable as dividend. Accordingly, the AO invoking the provisions of section 36(i)(ii) of the Act, disallowed the expenditure and also following the similar disallowance made in preceding assessment years i.e. AY 2006-07 to 2011-12. Aggrieved, assessee preferred the appeal before CIT(A), who relying on the Tribunal decision for earlier years allowed the claim of the assessee vide Para 4.4 and 4.5 as under: - "4.4 I have considered the contention of the AO as vel1 as of the AR of the appellant. It is dispute that the issue involved in the current ground is similar to the disallowance ma& in the case of the appellant in....
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....working directors are being commission since last more than 30 years whereas none of the other 27 shareholders and/or 2 other nonworking directors are paid anything. the AO never challenged the reasonability of expenses incurred by the appellant towards the remuneration of directors which included salary, commission and benefits such as PP etc. subject to all limit of 5% of the net profits computed under the provisions of the companies Act, 1956. The appellant further submitted that commission is nothing but a part of remuneration and hence, the same has to be judged from the angle of commercial expediency for the appellant. The appellant finally submitted that the nomenclature of Commission was provided to the remuneration since the same was done with a view to keep salary of the director's variable and avoid fixed burden on the appellant company. In view of the above, the addition made on this account is directed to be deleted because it is covered issue in favour of the appellant by its own order by Hon'ble ITAT, Mumbai in AYs 2006-07, 2007-08 & 2008-09 and since AO has not placed any material on record as to the status of case in High Court. However, the relief is guarant....
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....ench Society of Perfumers, Paris." 5. We also find that similar disallowances were made consistently from AY 2006-07 onwards till AY 20010-11 but only year 2006-07 where Tribunal has deleted the disallowance which was followed in AY 2009-10. For other years, appeals are pending either at CIT(A) stage or before Tribunal. We find that during the year under consideration, the assessee company has already declared the dividend of Rs. 5.40 crores and hence, it cannot be doubted that the payment of dividend was made in the guise of commission to the directors. In view of these facts and circumstances we affirmed the order of CIT(A) and dismissed this issue of Revenue's appeal. 6. The next issue in this appeal of Revenue is against the order of CIT(A) deleting the disallowance of legal and consultancy charges of Rs. 27,5,996/-. For this Revenue has raised following ground No.2: - "2. 0n the facts and circumstances of the case and in law, the IA CIT(A) erred in deleting the disallowance of legal and consultancy charges of Rs. 27,05,996/- without considering the fact that these expenses are not allowable as these expenses are related to inter-se dispute between two factions of the direc....
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....e Tribunal in the case of Echjay Ltd. v Dy. CIT (2004) 088 TTJ 1089 has held that hwere a compromise or settlement is shown to have been arrived at between the parties to proceedings under section 397 and 398 of the Companies Act, 1956, the Company Law Board has to consider whether the said settlement was of the company as well as in public interest and if it is not so, the Company Law Board is not bound to accept and record the same. It is also mentioned that the proceedings under section 397 and 398 are of representative nature. No individual rights can be ascertained nor can a personal relief granted to any member. The Reliefs contemplated under both the section concern the affairs of the company. Also, the before passing of the order, the Hon'ble Company Law Board has to notify the Government Under section 400, and the Government also has the right to raise objections on the same if it feels that it is not in the interest of the company as also in the larger public interest. it is thus submitted that while passing the orders, the Hon'ble Company Law Board has taken into consideration the interest of the company and substantial public interest. 5.4.3 Further Hon'ble Suprem....