TaxTMI 
TaxTMI 
2026 (1) TMI 972
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....unds of appeal:- "a. Whether on the facts and in the circumstances of the case, the Ld.CIT(A) is right in law, to hold the view that only because the payment of remuneration to the partners is TDS compliant 86 has been offered to tax by the respective recipients, the said payment justified as a genuine business requirement? b. Whether in the facts and in the circumstances of the case, the Ld.CIT(A) has erred in adjudicating the payment of remuneration as genuine despite there being a payment in form of dividend thereby attracting the tax liability in terms of dividend distribution tax? c. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred by not verifying whether there were any extra services for payment of huge remuneration rendered by the Directors thus making it fall under exceptions as per section 36(1)(ii) for it to be eligible for deduction. d. Whether on the facts and in the circumstances of the case, the Ld.CIT(A) is right in law in to hold the view that the violation of the section 194C(7) does not result in disallowance u/s 40(a)(ia) even as the benefit of section 194C(6) is available only on fulfillment....
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....order giving effect, - 44, rectification - 48, modified assessment orders - 11, verification - 26, deemed information - 6, and notice under section 153C - 7 were pending with him. Therefore, the total No. of 541 actions were pending in the month of March. 8. Over and above, it was stated that there were more than 73 audit objections having tax impact of thousands of crores were taken up in the month of December - January for initiating necessary remedial action as the limitation date for the same was also expiring on 31st of March 2024. He further stated that the impugned charge was carved out out of 5 erstwhile circles and two special ranges which was managed by a total of 07 Deputy Commissioner of income tax. Therefore, due to the above aforesaid circumstances and heavy workload the delay of 72 days occurred in filing of the appeal. 9. It was further stated that the delay was inadvertent and occurred due to the reasons beyond the control of the then jurisdictional assessing officer. The learned AO further stated that same is for sufficient cause, and therefore it may be condoned. 10. The learned authorised representative Ms. Lunkar relied heavily on the decision of the H....
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....4,158 G R Reddy - 3,47,31,839 Chiranjibi Sahoo - 2,63,12,001 - 10,52,47,998 Director's Remuneration (Including salary, bonus and contribution to PF) N K Lanka 5,96,75,370 2,99,02,844 G R Reddy 4,63,01,631 2,31,84,462 Chiranjibi Sahoo 3,55,35,647 1,78,59,812 14,15,12,648 7,09,47,118 Therefore Section 36(1)(ii) will be attracted. Section 36(1)(ii) reads as under: "any sum paid to an employee as bonus or commission21 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 commission" Therefore the deduction is allowed only if the same was not to be given as a dividend. The assessee stated that this remuneration was paid as they were full time employees of the company and hence it should be allowed as expenses. The assessee did not submit any copy of the agreement with the party or the exact nature of service rendered by the party for which the hike in the remuneration/bonus was made. Moreover the shareholder is a director of the company. If the assessee is stating that the payment ....
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.... its claim of payments made. Therefore, considering the facts and circumstances of the case, the disallowance made by the AO is accordingly not warranted and hence is deleted. Consequently, the grounds raised in connection with disallowance of Rs. 7,05,65,530/- made u/s. 36(1)(ii) of the Act are allowed." 15. Therefore, the learned assessing officer aggrieved with this finding of the learned CIT - A is in appeal before us. The learned CIT DR vehemently stated that that the learned assessing officer has challenged the deletion of the above ground as per ground No. A - C. The issue is also squarely covered by the decision of the Hon'ble Supreme Court in case of SRC Aviation Private Limited Versus Assistant Commissioner of Income Tax and another wherein the special leave petition filed by the assessee against the decision of the Hon'ble Delhi High Court disallowing the payment of bonus to the two directors of the petitioner company was dismissed and therefore the issue is squarely covered by the decision of the Hon'ble Supreme Court. 16. Against this, the learned authorised representative vehemently stated that learned CIT - A was shown the copy of the board resolution, profile ....
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....deciding the allowability of deduction. It is also not necessary that the payment should be made commensurate to the rendering of services or there should be some extra services rendered for payment on account of bonus or commission. It is also not required that whether the tax is deducted at source or not. It is also immaterial that whether the recipient of the income has offered this income as his income in the return of income, all these are the irrelevant factors. 19. The learned assessing officer has relied upon the decision of the special bench in case of Dalal Barocha Stock Brokers Pvt Ltd (2011) 10 ITR (Trib) 357 (Mumbai) (SB) wherein the assessee company during the relevant year had paid commission to the tune of Rs 40 lakhs to the three working directors. They are the only shareholders of the company and owned the entire share capital. During the assessment proceedings, the Assessing Officer asked the assessee to explain as to why the claim of expenditure on account of the commission should not be disallowed as the assessee earned substantial profits and the same amount could have been distributed as dividend. The assessee submitted that the commission was not in lieu ....
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....ra services have been rendered for payment of commission, it will be one of the relevant factors to consider while deciding whether the case is covered by exception provided in Section 36(1)(ii) i.e., whether the payment of commission is in lieu of dividend. In the present case, no evidence is available on record to support the plea that the directors had rendered any extra services for payment of huge commission in addition to services rendered as an employee for which salary has been paid. No such evidence has been placed nor even the details of any such extra services have been given. The special bench held that in view of the above discussions that the payment of commission of Rs. 1.20 crores to the three working directors was in lieu of dividend and the same is not allowable as deduction under Section 36(1)(ii). The special bench further held that the provisions of Section 37(1) will not also be applicable in such cases. 20. The learned CIT - A allowed the appeal of the assessee deleting the above disallowance stating that it is to note that the payments made to the Directors have been approved by the Board of Directors vide Board resolution passed. The appellant paid the r....
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.... submitted by the learned authorised representative, the bonus was paid to the directors out of the available net profits of the company in the ratio of salary paid to them and not exceeding five times the annual salaries of the directors. There was no reference of what were those directors have performed to on the bonus. The monthly salary of the director Shri N K Lenka was Rs 9,41,165/-, Shri G R Reddy of Rs 713601/- and shri Chiranjilal Sahoo of Rs 5,65,259/-. For the impugned assessment year the bonus is paid to all these three directors of Rs. 47,927,838/-, Rs. 37,440,387/- and Rs. 28,531,775/- amounting in all to Rs. 113,900,000/- as bonus. There is no evidence that what kind of services they have been rendering to the company to on this kind of bonus where their annual remuneration was only Rs 2 66,40,300/-. It is apparent that the bonus of Rs. 16.28 crores is distributed in the ratio of 42%, 33% and 25% to these three directors. As it is not available before us that what is the shareholding, we cannot decide this issue here that these payments are made to these persons in the ratio of their shareholdings. 23. We further find that that the learned assessing officer has al....