ACIT, New Delhi V. M/s. Creative Travel Pvt. Ltd., New Delhi

ITA 2172/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61753 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2012
• 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: K V K SINGH
• Section: 28

Judgement Text

ITA NO. 2172/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 2172/DEL/2012 A.Y. : 2009-10 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 3(1), NEW DELHI VS. M/S CREATIVE TRAVEL PVT. LTD., 27-30, CREATIVE PLAZA, NANAKPURA MOTI BAGH, NEW DELHI 110 021 (PAN : AAACC0874D) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. SHAILESH GUPTA, CA DEPARTMENT BY : SH. K.V.K. SINGH, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-VI, NEW DEL HI DATED 22.2.2012 PERTAINING TO ASSESSMENT YEAR 2009-10. 2. THE ISSUE RAISED IN THE REVENUES APPEAL IS THAT LD. COMMISSIONER OF INCOME TAX (A) ERRED IN DELETING TH E DISALLOWANCE OF ` 68,06,284/- U/S. 36(1)(II) ON ACCOUNT OF COMMISSION AND BONUS PAID BY THE ASSESSEE TO ITS WORKING DIRECTOR. 3. AT THE THRESHOLD, LD. COUNSEL OF THE ASSESSEE SU BMITTED THAT THE ISSUE IN APPEAL ALSO CAME UP IN ASSESSEES OWN CASE IN A.YRS. 2002-03, 2007-08 AND 2005-06. THE ITAT HAS DELETED THE ADD ITION IN THESE ITA NO. 2172/DEL/2012 2 CASES ON THIS ACCOUNT AND THE SAME WAS ALSO AFFIRM ED BY THE HONBLE DELHI HIGH COURT. 3.1 LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTRO VERT THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE. 4. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT THIS TRIBUNAL IN I.T.A. NO . 394/DEL/2009 FOR A.Y. 2005-06 HAS DELETED THE ADDITION IN THIS CASE BY HOLDING AS UNDER:- 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND GONE THROUGH THE RECORD CAREFULLY. SEC. 36(1)(II) OF TH E ACT HAS A DIRECT BEARING ON THE CONTROVERSY. THEREFORE, IT I S SALUTARY UPON US TO TAKE NOTE OF THIS CLAUSE. IT READS AS UNDER:- THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTER DEALT WITH THEREIN IN COMPUTING THE INCOME REFERRED TO IN SEC. 28 OF THE ACT. SECTION 36(1) (I) X X X X X (IA) X X X X X (IB) X X X X X II. ANY SUM PAID TO AN EMPLOYEE AS BONUS OR COMMISSION 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. ITA NO. 2172/DEL/2012 3 7. THE PLAIN READING OF SEC. 36(1)(II) CONTEMPLATE S TWO SITUATIONS. ACCORDING TO THE FIRST SITUATION, AN Y SUM PAID TO AN EMPLOYEE AS A BONUS OR COMMISSION FOR SERVICES RENDERED WOULD BE ALLOWED TO THE ASSESSEE . THE SECOND PART EXHIBITING THE OTHER CONDITION THAT THE DEDUCTION MENTIONED IN THE FIRST SITUATION COULD BE ALLOWED, IF SUCH SUM WOULD HAVE NOT BEEN PAYABLE T O AN EMPLOYEE AS A PROFIT OR DIVIDEND MEANING THEREBY IF THE AMOUNT OF COMMISSION OR BONUS IS RECEIVABLE BY AN EMPLOYEE IN THE SHAPE OF PROFIT / DIVIDEND THEN SUCH COMMISSION PAID TO SUCH EMPLOYEE WOULD NOT BE ALLOWED AS A DEDUCTION. WE HAVE ALREADY NOTICED T HE SHAREHOLDING PATTERN OF THE ASSESSEE IN PARAGRAPH 4 OF THIS ORDER. NO DOUBT, IT INDICATES THAT MOST OF THE SHARES ARE HELD BY THE FAMILY MEMBERS I.E. MR. RAM KOHLI HIS WIFE AND TWO SONS. BEING A PRIVATE LIMIT ED COMPANY CONTROLLED BY THE FAMILY MEMBERS, A RESOLUTION APPROVING THE PAYMENT OF COMMISSION TO THE WORKING DIRECTORS MAY NOT BE A VERY DIFFICULT TA SK BUT WHETHER THIS ARRANGEMENT INDICATES THAT IF THI S COMMISSION WAS NOT PAID TO THE WORKING DIRECTORS THEN IT WOULD BE RECEIVED IN THE SHAPE OF PROFIT/ DIVIDEND. IN OUR OPINION, THE REPLY WOULD BE SIMPL Y NO BECAUSE NO COMMISSION WAS PAID TO MRS. KOHLI. IF THIS AMOUNT OF ` 59 LACS WAS DISTRIBUTED ON ACCOUNT OF SHAREHOLDING PATTERN THEN SHE WOULD GET A SUBSTANTI AL SHARE WHEREAS SHE WAS NOT PLAYING ANY ACTIVE ROLE I N ITA NO. 2172/DEL/2012 4 THE DAY TO DAY BUSINESS OF THE ASSESSEE COMPANY. THE TWO OTHER DIRECTORS WHO HAD RECEIVED THE COMMISSION HAD A VERY SMALL SHAREHOLDING PATTERN WOULD NOT BE ABLE TO GET THE AMOUNT EQUIVALENT TO THE COMMISSION IN THE SHAPE OF DIVIDEND. THUS, EXACTLY THE COMMISSION AMOUNT WOULD NOT BE RECEIVABLE BY THE DIRECTORS IN THE SHAPE OF DIVIDEN D. THE DIRECTORS TO WHOM COMMISSION WAS PAID IS NOT WITH RESPECT TO THEIR SHAREHOLDING PATTERN RATHER IT IS LINKED WITH THE SALES TURNOVER OF THE ASSESSEE AND TO THE PERFORMANCE OF THE DIRECTORS. IT HAS NOTHING TO DO WITH THE SHAREHOLDING PATTERN. THE NEXT REASON WEIGHED IN OUR MIND IS THAT IN THE PAST SIMILAR COMMISSION WAS PAID TO THE WORKING DIRECTORS AS INFORMED BY THE LEARNED COUNSEL, BUT IT WAS NEVER DISALLOWED. THEREFORE, IN OUR OPINION, ASSESSING OFFICER HAS FAILED TO CONSTRUE THE FACTS AND CIRCUMSTANCES AND FAILED TO INTERPRET THE LAW IN RIG HT PERSPECTIVE. WE ALLOW THIS GROUND OF APPEAL AND DEL ETE THE DISALLOWANCE. 4.1 WE FIND THAT THE TRIBUNAL HAS ALSO DELETED THE SIMILAR ADDITIONS FOR A.YRS. 2002-03 AND 2007-08 AND THIS MATTER TR AVELLED TO THE HONBLE JURISDICTIONAL HIGH COURT WHEREIN THE ISSU E WAS DECIDED IN FAVOUR OF THE ASSESSEE. 4.2 RESPECTFULLY FOLLOWING THE PRECEDENTS AS ABOVE, WE AFFIRM THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) IN D ELETING THE IMPUGNED ADDITIONS IN THE HANDS OF THE ASSESSEE. ITA NO. 2172/DEL/2012 5 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/7/2012, U PON CONCLUSION OF HEARING. SD/- SD/- [ [[ [R.P. TOLANI R.P. TOLANI R.P. TOLANI R.P. TOLANI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 11/7/2012 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES