2019 (11) TMI 1188

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....lter or amend any ground of appeal raised above at the time of the hearing." 3. During the hearing despite giving notice, none appeared for the assessee, therefore, we are proceeding on the basis of assessment order and the order of the CIT(A). The submissions of the assessee before these authorities are taken as the submission before us. 4. The assessee company is engaged in the business of providing Technical and Management Consultancy services. The Assessing Officer observed that the assessee had paid commission to two of its Directors, Sh. Umesh Srivastava, Sh. Sumant Srivastava, to the tune of Rs. 1,19,25,068/- and Rs. 1,98,75,114/- respectively. The above two Directors held 19.8% and 12.8% shares respectively in the assessee company and such commission expenses were paid over and above the salary paid to them. The Assessing Officer held that such payments were covered within the ambit of section 36(1)(ii), which provides that any sum paid to any employee as bogus or commission for services rendered with the an allowable deduction where such sum would not have been payable to him as profits or dividends. The Assessing Officer held that commission paid to all four directors w....

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....6.2 The Ground No.1 of the appeal is general. Regarding the Ground No.2 of the appeal relating to disallowance of commission paid to the two Executive Directors under Section 36(1)(ii), I find that the issue is directly covered by the decision of the Hon'ble ITAT of Delhi in the case of appellant for A.Y.2005-06, 2006-07, 2008-09 and 2009-10. On careful consideration of the facts of the case, I find that there is no difference in the facts for the current year. Moreover, I find that the very allegation that the appellant has paid dividend in the garb of commission, is factually incorrect as the appellant had, in addition, paid dividend, which is as high as 375%, to its share holders (including to the two executive Directors holding shares) and hence, the very observation of the Ld. AO that the appellant had paid commission instead of dividend the two Executive Directors in violation of provision of Section 36(1)(ii) is not supported by the facts. The two Executive Directors had tremendous technical and managerial experience and have contributed a great deal to the growth of the business/productivity of the company which is in the nature of providing technical consultancy. The s....

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....admitted the payment of commission received and offered the same in their income tax returns and had paid at a maximum marginal rate. This clearly establishes the fact that there has been no tax avoidance motive behind the payment of commission to the directors by the assessee company. The CIT(A) has taken proper cognizance of these fact. There is no need to interfere with the finding of the CIT(A). Thus Ground No.1 of the Revenue's appeal is dismissed. 8. As regards Ground No.2, the CIT(A) held as under: "6.3.2 Without prejudice, I find that the appellant had made investment in group companies amounting to Rs. 10,16,60,000/- in the previous year relating to AY 2010-11. Such an investment was for the business purpose of commercial expediency. Therefore, in the light of the decision of Hon'ble ITAT Bangalore in the case of Garware Wal l Ropes Ltd vs. ACIT ( ITA No.5408/Mum/2012) , it could not have been considered for disallowance u/s 14A. Secondly, investments in Bonds/ FMPs Rs. 93.62 Crores were made, the interest income from which is fully taxable in the hands of the appellant company. Therefore, such investments should have been excluded from the purview of Section 14A. T....

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....e of the opinion that the issue of disallowance be readjudicated by the Assessing Officer and the Assessing Officer should decide the disallowance on the basis of his objective findings after giving a reasonable opportunity to the assessee of being heard. In view of the above, the appeal of the assessee in I.T.A.No.4563/Del/2012 is allowed for statistical purposes and the Revenue's appeal in I.T.A.No. 4706/Del/2012 is partly allowed for statistical purposes." Since the A.Y. 2011-12 and there is an administrative expenses as well, therefore, matter is remanded back to the file of the Assessing Officer for such a huge investment to be verified. Needless to say the assessee be given opportunity of hearing by following principle of natural justice. Ground No.2 is partly allowed for statistical purposes. 9. As regard Ground No.3, the CIT(A) held as under: 6.4 The Ground No.4 of the appeal relates to disallowance of certain payments made by the appellant to various parties presumably u/s 40(a)(i). I find that the appellant had made payment to the following parties: Particulars Amount Gia Nam Investment Consulting Joint Stock 1,029,170 Bagaza Pius 6,668,080 El Gherani 343,....