ACIT, New Delhi V. M/s. CTI Shipbrokers India Pvt. Ltd., Gurgaon

ITA 2171/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65247 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-07-2012
• Assessment Year: 2009-2010
• Appeal Filed On: 07-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J S AHLAWAT
• Assessee Lawyers: R K KAPOOR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI SHAMIM YAHYA ITA NO. 2171/DEL/12 A.YR. 2009-10 ACIT, CIRCLE 3(1), VS. M/S CTI SHIPBROKERS INDIA PVT. LTD. NEW DELHI. A-BLOCK ENKAY CENTRE, UDYOG VIHAR, PHASE-V, GURGAON-122010. PAN: AACCC3050D ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SH. J.S. AHLAWAT SR. DR RESPONDENT BY : SHRI R. K. KAPOOR FCA O R D E R PER R.P. TOLANI, J.M: : THIS IS REVENUES APPEAL AGAINST CIT(A)S ORDER DA TED 29-2-2012 RELATING TO A.YR. 2009-10. SOLE EFFECTIVE GROUND RA ISED IS AS UNDER: THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING ADDITION OF RS. 1,73,40,289/- U/S 36(1)(I) OF THE I T ACT ON ACCOUNT OF EX-GRATIA BONUS PAYMENT TO THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE: DURIN G THE ASSESSMENT YEAR IN QUESTION THE ASSESSEE COMPANY PAID EX GRATIA BONUS TO ITS MANAGING DIRECTOR SHRI J.S. KAPOOR A SUM OF RS. 1,73,40,289/- AND CLA IMED THE SAME TO BE ALLOWABLE U/S 36(1)(II). THE ASSESSING OFFICER DIS ALLOWED THE CLAIM, THEREBY 2 MAKING AN ADDITION OF RS. 1,73,40,289/- BY OBSERVIN G THAT THE SUM PAID AS EX-GRATIA BONUS COULD HAVE BEEN PAID AS PROFIT OR D IVIDEND. 3. IN FIRST APPEAL THE LD. CIT(A) DELETED THE ADDI TION BY OBSERVING THAT SIMILAR ADDITIONS MADE IN ASSESSEES OWN CASE FOR A .Y. 2007-08 HAVE BEEN DELETED BY THE ITAT DELHI BENCH B VIDE ORDER DATE D 14-7-2011 RENDERED IN ITA NO. 84/DEL/2011. AGGRIEVED, THE REVENUE IS I N SECOND APPEAL BEFORE US. 4. LD. COUNSEL FOR THE ASSESSEE AT THE OUT SET CONT ENDS THAT IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE THE ITAT IN ASSESS EES OWN CASE FOR A.Y. 2008-09 WHEREIN THE ITAT DELHI BENCH B VIDE ORDE R DATED 18-5-2012 RENDERED IN ITA NO. 5379/DEL/2011 HAS UPHELD THE OR DER OF THE CIT(A) IN DELETING THE ADDITION BY HOLDING THAT COMMISSION A ND EX GRATIA PAID TO MANAGING DIRECTOR SHRI J.S. KAPOOR WAS UNDOUBTEDLY PART OF HIS REMUNERATION FOR THE SERVICES RENDERED BY HIM. IN D OING SO THE ITAT ALSO REFERRED TO ITS EARLIER ORDER DATED 14-7-2011 IN AS SESSEES OWN CASE FOR A.Y. 2007-08. LD. COUNSEL SUBMITTED THAT FACTS OF THE CA SE FOR THE ASSESSMENT YEAR IN QUESTION REMAINING THE SAME, REVENUES APPEAL SH OULD BE DISMISSED BY UPHOLDING THE ORDER OF CIT(A). 5. LD. D.R. IS HEARD. 6. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN A.Y. 2008-09 THE I TAT IN ITA NO. 5379/DEL/2011 (SUPRA), HAS UPHELD THE ORDER OF CIT (A), IN DELETING SIMILAR ADDITION, BY OBSERVING AS UNDER: 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS OF BOTH THE PARTIES IN THE LIGHT OF ENTIRE DOCUMENTS ON RECORD. IT IS UNDISPUTED THAT MR. J.S. KAPOOR HELD ONLY 10% OF TH E SHARE OF THE ASSESSEE COMPANY AS SUCH, AS A MINORITY SHAREHO LDER, THE DIVIDEND OF RS. 1,71,29,375/- IN THE FORM OF COMMIS SION AND EX 3 GRATIA (BONUS) WAS NOT CONNECTED THEREWITH. LD. CI T(A) RELIED ON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COUR T OF DELHI IN THE CASE OF ACIT VS. BONY POLYMERS (P) LTD. 36 S OT 456 (DELHI) WHERE IT WAS HELD THAT INTER ALIA THE COMMI SSION WILL NOT BE ALLOWED AS DEDUCTION U/S 36(1)(II) OF THE ACT; I F HAD IT NOT BEEN SO PAID, IT WOULD BE PAID AS PROFITS OR DIVIDE ND. IN THE PRESENT CASE, NO MATERIAL OR EVIDENCE HAS BEEN BRO UGHT BY THE AO TO THE EFFECT THAT THE COMMISSION WOULD HAVE BEE N PAID AS DIVIDEND TO THE SHAREHOLDER. THE PAYMENT OF DIVIDEN D CONTAINING THE LIMITATION AND RESTRICTION I THIS RE GARD ARE GOVERNED BY THE COMPANIES ACT, 1956. THE AO CANNOT USE THE DISCRETION OF THE COMPANY REGARDING PAYMENT OR OTHE RWISE OF DIVIDEND. AS WE HAVE ALREADY NOTED THAT MR. J.S. KA POOR WAS HOLDING ONLY 10% OF THE SHARES AND HE WAS PAID THE DIVIDEND THEREON, ACCORDINGLY, IN PROPORTION OF THE DIVIDEND PAID TO THE OTHER 90% SHAREHOLDER, THERE WAS NO OCCASION LEFT F OR THE ASSESSEE COMPANY TO PAY FURTHER PROFIT OR DIVIDEND IN THE FORM OF COMMISSION OR EX GRATIA BONUS. 8. AS IT WAS HELD BY THE HONBLE HIGH COURT OF DELH I IN THE CASE OF BONY POLYMERS (SUPRA) THAT IN THESE FACTS A ND CIRCUMSTANCES, THERE IS NO APPLICABILITY OF SECTION 36(1)(II) OF THE ACT, AND EVEN THE REVENUE RECOGNIZES THAT THE F ACT OF PAYMENT ALONE IS ESSENTIAL AND THE EXCESSIVENESS TH EREOF CAN BE GONE INTO ONLY UNDER THE PROVISIONS OF SECTION 40A( II) OF THE ACT AND THE AO DID NOT INVOKE THE SAID PROVISIONS. ON THE BASIS OF FOREGOING DISCUSSION, WE ARE OF THE VIEW THAT TH E COMMISSION AND EX GRATIA PAID TO MANAGING DIRECTOR SHRI J.S. K APOOR WAS UNDOUBTEDLY PART OF HIS REMUNERATION FOR THE SERVIC ES RENDERED BY HIM SUPPORTED BY HIS ABLE EXPERIENCE. THEREFORE, THE LD. CIT(A) RIGHTLY DELETED THE ADDITION AND WE HAVE NO REASON TO INTERFERE IN THE SAME. 9. THE AR ALSO SUBMITTED A COPY OF THE ORDER DATED 14.7.2011 OF ITAT DELHI BENCH B IN ITA NO. 84/DEL /2011 PERTAINING TO AY 2007-08 IN THE PRESENT ASSESSEES OWN CASE WHERE IT WAS HELD THAT LD. CIT(A) ALLOWED THE CLA IM OF ASSESSEE ON REASONABLE AND JUSTIFIED GROUNDS AND AD DITION MADE BY THE AO WAS RIGHTLY DELETED BY THE FIRST APPELLAT E AUTHORITY. 4 THIS CASE IS ALSO SQUARELY COVERED BY THE ABOVE JUD GMENT OF THIS BENCH. 7. NO CHANGE IN FACTS AND CIRCUMSTANCES FOR THE ASS ESSMENT YEAR IN QUESTION HAS BEEN POINTED OUT BY EITHER PARTY. CONC URRING WITH EARLIER ORDERS OF THE ITAT IN ASSESSEES OWN CASE, WE HOLD THAT EX GRATIA PAID TO MANAGING DIRECTOR SHRI J.S. KAPOOR WAS PART OF HIS REMUNERAT ION FOR THE SERVICES RENDERED BY HIM. THE ORDER OF CIT(A) IN DELETING T HE ADDITION IN QUESTION BEING IN CONSONANCE WITH TRIBUNALS ORDERS IN ASSES SEES OWN CASE FOR A.Y. 2007-08 & 2008-09, WE SEE NO REASON TO INTERFERE WI TH THE SAME. ACCORDINGLY, ORDER OF CIT(A) IS UPHELD. 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 09-08-2012. SD/- SD/- ( SHAMIM YAHYA ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 09-08-2012. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR 5