C.D. Integrated Services Ltd., Ahmedabad V. The Dy. Commissioner of Income Tax, Circle-3, Ahmedabad

ITA 2275/AHD/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5915 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 02-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Assessee Lawyers: A C SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) ITA. NO: 2275/AHD/2016 (ASSESSMENT YEAR: 2011-12) C.D. INTEGRATED SERVICES LTD., A-101/102, B-802, PREMIUM HOUSE, OPP. GANDHIGRAM RAILWAY STATION, ASHRAM ROAD, AHMEDABAD-380 009 V/S THE DCIT, CIRCLE-3, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AABCC 2483R APPELLANT BY : SHRI A.C. SHAH, AR RESPONDENT BY : SHRI S. K. DEV, SR. D.R. ( )/ ORDER DATE OF HEARING : 18 -01-201 9 DATE OF PRONOUNCEMENT : 21 -01-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A)-10, AHMEDABAD DATED 24.04.2015 PERTAINING TO A.Y. 2011-12. THERE IS ITA NO. 2275 /AHD/2016 . A.Y. 2011-1 2 2 SOLE ISSUE WITH REGARD TO CONFIRMING ADDITION OF CO MMISSION OF RS. 10,00,000/- PAID TO SHRI PARTHIV MAHADEVIA AS A PART OF REMUNER ATION ON THE GROUND THAT IT IS NOT ALLOWABLE UNDER SECTION 36(1)(II). 2. A PERUSAL OF THE AUDITED PROFIT & LOSS ACCOUNT OF T HE ASSESSEE FOR THE YEAR ENDED ON 31/03/201 LAND OTHER DETAILS SUBMITTED BY THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS NOTICED THAT THE A SSESSEE COMPANY HAS PAID COMMISSION OF RS.10,00,000/- TO DIRECTOR SHRI PARTH IV MAHADEVIA. THE ASSESSEE WAS THEREFORE, REQUESTED TO SHOW CAUSE VIDE ORDER S HEET ENTRY DATED 18/12/2013 TO MAKE ITS SUBMISSION WITH REGARD TO AL LOWABILITY OF THE SAME U/S 36(1)(II). 3. THE ASSESSEE VIDE LETTER DATED 10/01/2013 HAS INT ERALIA, SUBMITTED AS UNDER- IN THIS CONNECTION, IT MAY PLEASE BE NOTED THA T SHRI PARTHIVE MAHADEVIA IS A WHOLE TIME DIRECTOR OF THE ASSESSEE COMPANY APPOINTED IN APRIL 2006 AND HIS APPOINTMENT IS RENEWED IN APRIL 2011. AS REGARDS A.Y. 2011-12 SHRI PARTHIV MAHADEVIA IS P AID COMMISSION OF RS. 10 LACS CALCULATED IN ACCORDANCE WITH SEC 349 OF THE C OMPANIES ACT WHICH IS GIVEN IN THE AUDIT REPORT. THE DISALLOWANCE OF SAID COMMI SSION WAS MADE U/S 36(1) (II) IN A.Y. 2009-10. THE SAID DISALLOWANCE WAS DEL ETED BY CIT(A) AND REVENUE HAS NOT PREFERRED ANY APPEAL AGAINST CIT(A) ORDER O F ITAT.' 4. THE SUBMISSION OF THE ASSESSEE COMPANY MADE IN THIS REGARD HAS BEEN PERUSED & CAREFULLY CONSIDERED. IN THIS CONTEXT, IT IS IMPE RATIVE TO REFER TO THE PROVISIONS OF SECTION 36(L)(II) OF THE INCOME TAX A CT, 1961, WHICH READS AS UNDER: ITA NO. 2275 /AHD/2016 . A.Y. 2011-1 2 3 '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 DI VIDEND IF IT HAD NOT BEEN PAID AS BONUS OR COMMISSION'. 5. A BARE READING OF THE ABOVE PROVISION MAKES IT ABUN DANTLY CLEAR THAT COMMISSION IS PAYABLE ONLY TO THE EMPLOYEES. SHRI P ARTHIV MAHADEVIA IS A DIRECTOR OF THE COMPANY, ALSO GETTING SALARY AS REM UNERATION WHICH IS EVIDENT FROM THE EXPLANATION FURNISHED BY THE ASSESSEE ITSE LF DURING THE COURSE OF ASSESSMENT PROCEEDINGS. SECTION 36(1 )(II) CLEARLY STIPULATES THAT DEDUCTION IS ALLOWED ONLY IF THE SAME IS PAID AS BONUS OR COMMIS SION TO THE EMPLOYEE. HENCE, THE CONTENTION OF THE ASSESSEE COMPANY IS DE VOID OF MERIT AND IS THEREFORE, NOT TENABLE. THE AMOUNT OFRS.10,00,000/- IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. ; 6. AGAINST THE ADDITION OF RS. 10,00,000/-, ASSESSEE P REFERRED FIRST STATUTORY APPEAL BEFORE THE LD. CIT(A) WHO DISALLOWED THE APPEAL OF THE ASSESSEE ON THE GROUND THAT CASE OF RS. 10 LAKHS IS NOT SUPPORTED BY BOARD RESOLUTION AND NO WORKING HAS BEEN PROVIDED TO JUSTIFY THE COMMISSION FOR THE PERIOD OF 01.04.2010 TO 30.11.2010. 7. NOW APPELLANT HAS COME BEFORE US. THERE IS A DELAY OF ABOUT 400 DAYS AND ASSESSEE HAS STATED THAT CLERK OF THE ASSESSEE HAD MISPLACED THE ORDER OF THE LD. CIT(A) AND THEY CAME TO KNOW ONLY AFTER WHEN RECOVE RY NOTICE WAS RECEIVED BY THE ASSESSEE. ITA NO. 2275 /AHD/2016 . A.Y. 2011-1 2 4 8. IN SUPPORT OF ITS CONTENTION, ASSESSEE HAS FILED AF FIDAVIT ALONGWITH APPLICATION. WE ARE SATISFIED FOR THE REASONS STATED THEREIN. TH EREFORE, WE ARE CONDONE THE DELAY AND PROCEED WITH THE APPEAL. 9. AS WE CAN SEE ON MERIT IN IMPUGNED ORDER, LD. CIT(A ) DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT BOARD RESOLUTION AL ONGWITH WORKING OF COMMISSION HAS NOT BEEN PROVIDED BY THE ASSESSEE TO THE AUTHORITIES. THEREFORE, THE CLAIM OF THE ASSESSEE IS NOT ACCEPTA BLE. TODAY LD. A.R. SHOWN US COPY OF THE RESOLUTION ALONGWITH DETAIL WORKING OF THE COMMISSION AND CERTIFIED THAT FOLLOWING WERE FILED BEFORE THE LOWE R AUTHORITIES AND ALSO DRAWN OUR ATTENTION TOWARDS THE ORDER OF THE LD. CIT(A) F OR ASSESSMENT YEAR 2009-10 WHEREIN LD. CIT(A) HAS GRANTED RELIEF TO THE ASSESS EE IN ITS OWN CASE FOR SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE. THEREFORE, WE ARE OF THE OPINION, THIS IS A FIT CASE WHERE RELIEF SHOULD BE GRANTED. THUS, WE ALLOW THE APPEAL OF THE ASSESSEE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 21- 01- 2019 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 21/01/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED.