TaxTMI 
TaxTMI 
2019 (5) TMI 847
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.... to file appeal in the above mentioned case before the ITAT, New Delhi on the following grounds of appeal. 1) On the basis of the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting an addition of Rs. 1,77,79,000/- on account of bonus paid to one of its Director, ignoring the fact that the provision of section 36(1)(ii) of the I.T. Act, 1961 which says that Bonus / Commission paid to an employee is not allowable as deduction if it could have been paid as profit or dividend. 2) The appellant craves leave for reserving the right to amend, modify, alter, add or forego any grounds of appeal at any time before or during the hearing of this appeal. ITA NO. 2991/DEL/2016 (AY 2012-13) The DCIT, Circle-5(1), New Delhi is hereby directed to file appeal in the above mentioned case before the ITAT, New Delhi on the following grounds of appeal. 1) On the basis of the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting an addition of Rs. 1,77,37,500/- on account of bonus paid to one of its Director, ignoring the fact that the provision of section 36(1)(ii) of the I.T. Act, 1961 which sa....
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....n paid as dividend. In response to the same, assessee has submitted its reply, which was considered by the AO, but the same was not accepted by him. AO observed that the cases relied upon by the assessee are not applicable in the case of the assessee as the facts are different in the cases relied upon by the Assessee. During the year assessee has paid Rs. 1.27 crores as salary and Rs. 1.78 crores as bonus. The assessee has not corroborated the claim that the bonus was paid at par with other employees' base on the percentage of salary. It was further observed that assessee has not furnished any evidence for the performance of the Director enabling him to get the bonus much more than the salary and much more as compared to other employees. AO further noted that the allow ability of bonus / commission paid to an employee is based on the main section of 36(1)(ii). It is a well laid down law that where the language of the section is plain, clear and the unambiguous, it has to be understood in the sense, what it literally means. No interpretations/outside meanings should be attached to it. In this case the provisions of section 36(1)(ii) of the Act simply says that bonus / commission ....
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....idend instead of bonus / commission since the payment is being made to Directors of the Company. However, in the instant case the assessee company has declared No Dividend. In view of above, she stated that the assessee company is avoiding tax to the extent of 13.5% approx. as dividend distribution tax even after accepting the argument of the assessee that Directors are paying tax on bonus received by them, by resorting to such means. Hence, the addition in dispute made by the AO may be confirmed by cancelling the order of the Ld. CIT(A). In support of her contention, she relied upon the she filed the Written Submission which read as under:- "In the above case, it is humbly submitted that the following decisions may be considered with regard to Section 36(1 )(ii) of I.T.Act: i) Order of Special Bench, Hon'ble ITAT, Mumbai, in case of M/s Dalai & Broacha Stock Broking (P) Ltd.[2011] 131 ITD 36, in ITA No. 5792 (Mum) of 2009 (Copy enclosed) wherein payment to commission to Directors have been held to be lieu of Dividend and hence not deductible u/s 36(1)(ii). ii) Order of Hon'ble ITAT Bench, Chandigarh, dtd. 09.12.2014 in case of Travelmatics(P) Ltd. Vs.....
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....he records, Paper Book filed by the assessee; submissions of both the parties, case laws relied upon from both sides and especially the impugned order. We find that the assessee company filed its return of income declaring a loss of Rs. 1,13,07,173/-. The case of the assessee was selected for scrutiny. The assessee company engaged in the business of management consultancy services during the year under consideration. The AO in the assessment order was of the view that the amount of Rs. 1.78 crores paid by the assessee to its Director Mr. Sanjay Mehta, and claimed as bonus was not allowable in view of section 36(1)(ii) of the Act because the sum was actually payable as dividend. However, it has been observed by Hon'ble Courts that there are certain limitations and restrictions in the matter of payment of dividend and discretion of the company either to pay or not to pay dividend cannot be assumed. We find that the Assessing Officer has not brought any material on record to substantiate this allegation that the amount in question was actually payable as dividend. In fact, Mr. Sanjay Mehta was having only 11% shareholding in the assessee company and if Rs. 1.78 crores had been paid as....
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....arket conditions, but not exceeding an amount of Rs. 2 crores. In terms of Board's Resolution only, Sh. Sanjay Mehta, one of the three employee director's was paid bonus of Rs. 1.97 crores, who had share capital of Rs. 1.1 lakhs, out of total capital of Rs. 10 lakhs i.e. 11% shareholding in the company. Therefore, bonus actually paid in installments i.e. Rs. 0.54 crores paid on August 31, 2009, Rs. 0.5 crores paid on November 30, 2009 & the balance Rs. 0.90 crores, paid on February 28, 2010, formed part of his overall remuneration. Since remuneration was also commensurate with his experience & market & have no bearing on shareholding, the disallowance made by the AO of Rs. 1,97,43,000/- is hereby directed to be deleted, as the AO has not contradicted the said clarifications. The appellant to get suitable relief accordingly." 3.2.3 For the reasons given in para 3.2.1 above and since there is no change in the facts vis-a-vis earlier years in which my predecessor CIT (Appeals) have allowed the claim of the appellant, and also reliance on judgements of Hon'ble Courts on the issue as given in the submissions of the assessee company, the Assessing Officer is hereby directed ....