M/s. CBRE South Asia (P) Ltd., New Delhi V. DCIT, New Delhi

ITA 3527/DEL/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0271 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 15-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: GAUTAM JAIN SH LALIT MOHAN
• Keywords: Depreciation; Transfer pricing; Opportunity of being heard; International transaction; Rule of consistency; Competent authority; Commercial expediency; TDS; Set aside
• Section: 143(3); 201; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SH. R. K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.3527/DEL/2016 ASSESSMENT YEAR: 2009-10 M/S. CBRE SOUTH ASIA (P) LTD., GROUND FLOOR, PTI BUILDING,4 PARLIAMENT STREET, NEW DELHI-110005 PAN NO. AAACC9308A VS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 3 (1) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. GAUTAM JAIN, ADVOCATE SH. LALIT MOHAN, ADVOCATE RESPONDENT BY SH. S. S. RANA, CIT(DR) DATE OF HEARING: 06/05/2019 DATE OF PRONOUNCEMENT: 28/06/2019 ORDER PER R.K. PANDA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 31.03.2016 OF THE CIT(A)-2, NEW DELHI R ELATING TO A. Y. 2009-10. 2. THE GROUND OF APPEAL NO.1 TO 1.3 RAISED BY THE A SSESSEE READS AS UNDER :- PAGE | 2 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )- 2, NEW DELHI HAS ERRED BOTH IN LAW AND ON FACTS IN UP HOLDING THE DISALLOWANCE OF RS.6,64,64,442/- REPRESENTING C OMMISSION PAID TO SH. ANSHUMAN MAGAZINE, DIRECTOR OF THE APPELL ANT COMPANY BY INVOKING SECTION 36(1) (II) OF THE ACT. 1.1 THAT DISALLOWANCE SUSTAINED UNDER SECTION 36 (1) (II ) OF THE ACT IS OTHERWISE IS IN DISREGARD AND DISRESPECT O F THE ORDER OF HONBLE TRIBUNAL AND ORDERS OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOR ASSESSMENT YEAR 2007-08 AND 2008-0 9 WHEREIN TOO, IDENTICAL DISALLOWANCES MADE HAD BEEN D ELETED AND THEREFORE, THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) OUGHT TO HAVE RESPECTFULLY FOLLOWED THE SAME AND AS S UCH, THE DISALLOWANCE SO UPHELD IS ILLEGAL, INVALID AND WHOLLY UNSUSTAINABLE. 1.2 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS FAILED TO APPRECIATE THAT SINCE SHRI ANSHUMAN MAG AZINE AS A MANAGING DIRECTOR OF THE APPELLANT COMPANY WAS TO M AKE EXTENSIVE EFFORTS TO OBTAIN AND INCREASE THE BUSINES S OF THE APPELLANT COMPANY AND DEVOTE EXTRA TIME AND AS SUCH I T WAS RESOLVED THAT SHRI ANSHUMAN MAGAZINE BE PAID INCENTIVE IN THE FORM OF COMMISSION AT 30% OF THE NET PROFITS FOR EA CH YEAR AFTER ADDING BACK DEPRECIATION, SINCE ASSESSMENT YEAR 200 4-05, APART FROM THE BASIC SALARY WHICH STOOD ALLOWED AND ACCEPTED IN PRECEDING YEARS. 1.3 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED BOTH IN LAW AND NO FACTS IN RECORDING VARIO US ADVERSE INFERENCES WITHOUT GRANTING ANY OPPORTUNITY WHICH A RE ALSO CONTRARY TO FACTS ON RECORD, MATERIAL PLACED ON REC ORD AND, ARE OTHERWISE ABSOLUTELY UNWARRANTED. PAGE | 3 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY AND ENGAGED IN THE BUSINESS OF PROVIDING RE AL ESTATE CONSULTANCY SERVICES, SITE MANAGEMENT SERVICES, PRO FESSIONAL ADVISORY SERVICES AND PROJECT MANAGEMENT SERVICES. IT FILED ITS RETURN OF INCOME ON 28.09.2009 DECLARING TOTAL INCO ME OF RS.31,79,41,751/-. SINCE THE ASSESSEE HAS ENTERED I NTO INTERNATIONAL TRANSACTION WITH ITS ASSOCIATED ENTER PRISES/ CONCERNS, THE ASSESSING OFFICER REFERRED THE MATTER TO THE TPO FOR DETERMINING THE ARMS LENGTH PRICE OF THE INTERNATIO NAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE. THE TPO VIDE ORDER DATED 26.11.2012 PASSED ORDER U/S. 92CA (3) DETERMI NING NIL ADJUSTMENT TO THE ALP OF THE INTERNATIONAL TRANSACT ION. 4. THE ASSESSING OFFICER DURING THE COURSE OF ASSES SMENT PROCEEDINGS OBSERVED FROM THE AUDIT REPORT THAT THE ASSESSEE COMPANY HAS PAID SALARY AND ALLOWANCES TO ITS DIREC TOR WHICH ALSO INCLUDES BONUS /EX-GRATIA ALLOWANCES PAID TO S H. ANSHUMAN MAGAZINE AMOUNTING TO RS.6,64,65,442/-. THE ASSESS ING OFFICER NOTED FROM THE SUBMISSION FILED BY THE ASSESSEE THA T SH. ANSHUMAN MAGAZINE IS A SHARE HOLDER OF THE COMPANY WITH 24% SHARE HOLDING AND BALANCE SHARE HOLDING IS WITH CB RICHARD EILLS HOLDING. ACCORDING TO THE ASSESSING OFFICER AS PER PROVISIONS OF SECTION 36 (1) (II) OF THE IT ACT, 1961, BONUS OR C OMMISSION PAID TO AN EMPLOYEE IS ALLOWABLE AS DEDUCTION IF AND ONLY I F IT IS NOT PAYABLE AS PROFIT OR DIVIDEND. HOWEVER, IN THE CASE OF ASSESSEE PROFIT OF RS.26,74,54,304/- HAS BEEN SHOWN BEFORE T AX AND NO DIVIDEND HAS BEEN PROPOSED OR DISTRIBUTED AMONG THE SHARE PAGE | 4 HOLDERS WHO ARE ALSO DIRECTORS OF THE COMPANY. HE, THEREFORE, INFERRED THAT THE ABOVE AMOUNT HAS BEEN APPARENTLY PAID AS COMMISSION AND BONUS AND NOT AS DIVIDEND TO REDUCE THE INCOME OF THE COMPANY AND TO AVOID DIVIDEND DISTRIBUTION T AX. HE, THEREFORE, CONFRONTED THE SAME TO THE ASSESSEE AND ASKED THE ASSESSEE TO EXPLAIN THE JUSTIFICATION OF THE ADMISS IBILITY OF BONUS / COMMISSION TO THE DIRECTOR. REJECTING THE VARIOU S EXPLANATION GIVEN BY THE ASSESSEE AND OBSERVING THAT THE RELIEF GRANTED BY THE CIT(A) FOR A. Y. 2007-08 AND 2008-09 HAVE NOT BEEN ACCEPTED BY THE DEPARTMENT AND APPEAL HAS BEEN FILED BEFORE THE TRIBUNAL, THE ASSESSING OFFICER DISALLOWED THE AMOUNT OF RS.6,64, 65,442/- BY INVOKING THE PROVISION OF SECTION 36 (1) (II) OF TH E IT ACT, 1961. 5. IN APPEAL THE LD. CIT(A) UPHELD THE ACTION OF TH E ASSESSING OFFICER BY OBSERVING AS UNDER :- 4.3.1 I HAVE EXAMINED OBSERVATIONS MADE BY THE AO I N THE ASSESSMENT ORDER PASSED, SUBMISSIONS MADE BY THE APPELLANT DURING THE COURSE OF APPEAL, VARIOUS EVIDENCES PLACED ON RECORD, VARIOUS JUDGMENTS RELIED UPON BY THE APPELLANT AND ALSO EXAMINED THE FACTS OF THE CASE. THE AO INVOKED THE PROVISION S OF SECTION 36(1 )(II) WHICH PROVIDES THAT ANY SUM PAID TO AN EMPLOYEE AS BONUS OR COMMISSION FOR SERVICES RENDERED IS TO BE DEDUCTED IN COMPUTING THE TOTAL I NCOME, WHERE SUCH SUM WOULD NOT HAVE BEEN PAYABLE TO HIM AS PROFITS OR DIVIDEND IF IT HAD NOT BEEN PAID AS BONUS OR COMMISSION. 4.3.2 THE APPELLANT HAS RELIED UPON THE ORDER OF TH E HON'BLE TRIBUNAL IN THE CASE OF M/S CREATIVE TRAVEL (P) LTD. VS. ACIT IN ITA NO. 19 0/D 2010 FOR ASSESSMENT YEAR 2006-07 DATED 13.05.2011. I HAVE EXAMINED THIS ORDE R DEEPLY AND IN MY PERSONAL OPINION AND WITH GREAT RESPECT TO THE HONBLE ITAT, 1 FIND THAT FACTS OF THIS CASE AND THOSE OF THE APPELLANT ARE ENTIRELY DIFFERENT. IN T HAT CASE NO DOUBT THE OTHER FAMILY MEMBERS WERE ALSO THE SHAREHOLDERS AND COMMISSION W AS PAID TO THE DIRECTOR WHO PAGE | 5 WAS NOT HAVING THE SUBSTANTIAL SHAREHOLDING, WHEREA S IN THE PRESENT CASE, MR. ANSHUMAN MAGAZINE WAS HAVING 99.99% SHAREHOLDING OF THE APPELLANT COMPANY WHEN THE RESOLUTION DATED 27.5.2003 WAS PASSED, AND IF NO SUCH RESOLUTION HAD BEEN PASSED, EVEN THEN THE ENTIRE PROFITS WERE TO GO TO SHRI ANSHUMAN MAGAZINE AND HIS WIFE (WHO HELD THE BALANCE SHARES). THIS FACT CANNO T BE BRUSHED ASIDE THAT MR. ANSHUMAN MAGAZINE WAS HOLDING 99.99% SHAREHOLDING, AND DISTRIBUTION OF PROFIT IN THE SHAPE OF COMMISSION WAS WITH THE SOLE INTENTION TO AVOID DIVIDEND DISTRIBUTION TAX. WHICH OTHERWISE WAS TO BE PAID BY THE APPELLAN T COMPANY, IF NO SUCH RESOLUTION HAD BEEN PASSED FOR PAYMENT OF SUCH COMMISSION, WHI CH IS NOT PERMISSIBLE AS PER PROVISIONS OF SECTION 36(1 )(II) OF THE ACT. THE IN TENTION OF THE LEGISLATURE TO BRING SUCH PROVISIONS ON THE STATUTE IS TO PREVENT COMPAN IES FROM DIVERTING THEIR PROFITS AS INCENTIVE / BONUS / COMMISSION WHICH OTHERWISE ARE TO BE PAID TO THE SHAREHOLDERS AS DIVIDEND. THEREFORE, WHILE PASSING THE RESOLUTION F OR PAYMENT OF COMMISSION TO THE PERSON HOLDING 99.99% SHAREHOLDING, WE HAVE TO SEE THE INTENTION FOR PASSING SUCH RESOLUTION. ANY SUCH PAYMENT MADE TO THE SHAREHOLDE R EMPLOYEE SHALL REDUCE THE PROFIT OF THE COMPANY FOR PURPOSE OF DISTRIBUTING T HE DIVIDEND AND THUS THERE WAS AVOIDANCE OF DISTRIBUTION OF DIVIDEND AND HENCE PAY MENT OF DIVIDEND DISTRIBUTION TAX. THE QUESTION IS IF MR. ANSHUMAN WOULD HAVE NOT BEEN PAID THIS COMMISSION, HE WOULD STILL HAVE GOT MORE OR LESS THE SAME AMOUNT AS DIVI DEND. THEREFORE, THE PRESENT CASE BEFORE ME IS A CLEAR CASE WHERE THE TRUE PROFITS OF THE COM PAN) WERE DISTRIBUTED TO SHRI ANSHUMAN UNDER THE GUISE OF COMMISSION WHICH O THERWISE HE WOULD HAVE RECEIVED AS DIVIDEND INCOME. THEREFORE, PROVISIONS OF SECTION 36(1 )(II) ARE CLEARLY ATTRACTED IN THE PRESENT CASE. 4.3.3 I HAVE ALSO EXAMINED THE JUDGMENT RELIED UPON BY THE APPELLANT OF THE HON'BLE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. CELSIUS REFRIGERATION (P) LTD (1TA NO. 4'46 DEL 2010 FOR ASSESSMENT YEAR 200~'-20 08 DECIDED ON 3D' DECEMBER. 2010). 1 FIND THAT THE FACTS OF THIS CASE ALSO DIFFER FRO M THE CASE OF THE APPELLANT. IN THE CASE RELIED UPON, THERE WERE MORE THAN ONE DIRECTOR WHO WERE SHAREHOLDERS AND WERE GIVEN THE COMMISSION ACCORDING TO THE TERRITORY ASS IGNED TO THEM, WHEREAS IN THE PRESENT CASE, ALMOST ENTIRE PROFITS WERE TO BE SHAR ED BY SHRI ANSHUMAN MAGAZINE WHEN THE SAID RESOLUTION WAS PASSED DATED 27.5.2003 . WHICH APPEARS TO HAVE BEEN PASSED WITH THE SOLE INTENTION TO AVOID PAYMENT OF DIVIDEND DISTRIBUTION TAX. PAGE | 6 A.3.41 HAVE ALSO EXAMINED VARIOUS OTHER CASE LAWS R EFERRED TO BY THE APPELLANT. HOWEVER, IN VIEW OF MY ABOVE OBSERVATIONS, SINCE IT IS A CASE WHERE THE DIRECTOR OF THE APPELLANT COMPANY WAS HOLDING ALMOST ENTIRE SHA REHOLDING OF THE APPELLANT COMPANY, I FIND THAT THE FACTS OF THE APPELLANT COM PANY DIFFER FROM THOSE CASES, AND IN THE PECULIAR FACTS, THE ISSUE OF PAYMENT OF COMMISS ION TO THE MANAGING DIRECTOR SHRI ANSHUMAN MAGAZINE WHO HELD 99.99% SHARES WHEN SUCH RESOLUTION FOR PAYMENT OF COMMISSION WAS PASSED, NEED TO BE EXAMINED CONSIDER ING THOSE CIRCUMSTANCES. THEREFORE, WITH GREAT RESPECT TO THE HONBLE 1TAT. I AM OF THE PERSONAL OPINION THAT THIS FACT ESCAPED THE ATTENTION OF THE HON'BLE I I AT. WHILE DECIDING THE ISSUE IN A.Y. 2007-08 AND A.Y. 2008-09 IN THE APPELLANTS CASE. F URTHER, IN PARA 10 OF THEIR ORDER DATED 07 TH MARCH, 2016 FOR A.YS 2007-08 & 2008-09 IN THE CASE OF THE APPELLANT COMPANY, HONBLE ITAT HAVE INTER-ALIA OBSERVED AS F OLLOWS:- ' ..................... IT IS NOTED THAT THE A.O. PROCEEDED TO MAKE DISALLO WANCE ON INCORRECT ASSUMPTION OF FACT THAT NO DIVIDEND HAS B EEN DISTRIBUTED AMONGST THE SHAREHOLDERS IN THE INSTANT YEAR; WHERE AS A MATTER OF FACT THAT DIVIDEND OF RS.13 90 CRORES WAS DECLARED IN THE INSTANT YEAR .............. ' HENCE, THE FACTS OF THE CASE FOR THE YEAR UNDER APP EAL ARE DIFFERENT IN THE SENSE THAT DIVIDEND HAS NOT BEEN PAID BY THE APPELLANT CO MPANY DESPITE EARNING PROFITS BEFORE TAX OF RS.26.74 CRORES AND RATHER BONUS/COMMISSION OF RS.6.64,64,442/- HAS BEEN PAID TO SH. ANSHUMAN MAGAZINE WHO HELD 24% OF THE SHARES DU RING THE YEAR. 4.3.5 THE APPELLANT HAS RELIED ON THE ORDERS OF THE ERST WHILE CIT(A)-VI. NEW DELHI, FOR AY 2007-08 AND 2008-09. THESE ORDERS PASSED BY THE THEN CIT(A)-VI. NEW DELHI, WERE CHALLENGED BY THE REVENUE BEFORE THE MONBLE 1TAT, NEW DELHI. HONBLE ITAT. NEW DELHI HAS DECIDED THESE ORDERS IN FAVOUR OF THE APP ELLANT. IN ANY CASE, THE PRINCIPLE OF RES-JUDICATA IS NOT ATTRACTED SINCE EACH ASSESSMENT YEAR IS SEPARATE IN ITSELF. 4.3.6 FOR THE ASSESSMENT YEAR UNDER CONSIDERATION THE APPELLANT COMPANY HAS SHOWN PROFIT OF RS. 26,74.54.304/- BEFORE TAX. HOWEVER, N O DIVIDEND HAS BEEN PROPOSED OR DISTRIBUTED AMONG THE SHAREHOLDERS FOR THE ASSESSME NT YEAR UNDER CONSIDERATION. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THERE WERE ONL Y TWO SHAREHOLDERS IN THE APPELLANT COMPANY I.E. MR. ANSHUMAN MAGAZINE HOLDING 24% SHAR EHOLDING AND M/S. CB RICHARD ELLIS HOLDING LIMITED, HOLDING 76% SHAREHOLDING OF THE COMPANY. IT IS NOT OUT OF PLACE TO MENTION HERE THAT AS ON 27.05.2003 WHEN THE RESOLUT ION WAS PASSED FOR PAYMENT OF PAGE | 7 COMMISSION TO SHRI ANSHUMAN MAGAZINE, THE MANAGING DIRECTOR, HE WAS HAVING 99.99% SHAREHOLDING IN THE COMPANY AND HIS WIFE SMT. RASHM I MAGAZINE WAS HAVING ONLY 0.01% SHAREHOLDING I. E. ONLY 1 SHARE. THEREAFTER, THERE WAS A CHANGE IN SHAREHOLDING OF THE APPELLANT COMPANY AND FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. SHRI ANSHUMAN MAGAZINE, MANAGING DIRECTOR, WAS HOLDING 24% SHARES IN THE APPELLANT COMPANY. THOUGH THERE WAS PROFIT BEFORE PAYMENT 01 TAX' AMOU NTING TO RS. 26,74,54,304/-, YET NO DIVIDEND WAS DISTRIBUTED EITHER FOR THE ASSESSMENT YEAR UNDER CONSIDERATION OR EVEN IN THE PRECEDING ASSESSMENT YEAR WHEN THE APPELLANT CO MPANY HAD PROFIT OF RS. 37.08,83.286/-. IN CASE THERE HAD BEEN NO SUCH RESO LUTION FOR PAYMENT OF COMMISSION AS HAS BEEN CLAIMED TO HAVE BEEN PASSED, THE SUM SO PA ID AS COMMISSION WOULD HAVE BEEN PASSED TO HIM AS DIVIDEND AND IN THAT CASE THE APPE LLANT COMPANY WOULD HAVE PAID DIVIDEND DISTRIBUTION TAX ON SUCH PROFITS EARNED, A ND PROFIT/TAXABLE INCOME OF THE APPELLANT COMPANY WOULD ALSO HAVE FURTHER INCREASED BY AN AMOUNT OF THE SO CALLED COMMISSION PAID TO MR. ANSHUMAN MAGAZINE. HOWEVER, IN ORDER TO AVOID DIVIDEND DISTRIBUTION TAX, UNDER THE GUISE OF COMMISSION PAI D AS PER RESOLUTION PASSED, THE APPELLANT COMPANY HAS AVOIDED PAYMENT OF DIVIDEND D ISTRIBUTION TAX. COMMISSION PAID TO SHRI ANSHUMAN MAGAZINE IS WITH THE SOLE INTENTION T O REDUCE THE INCOME OF THE COMPANY AND TO AVOID DIVIDEND DISTRIBUTION TAX. 4.3.7 PROVISIONS OF SECTION 36(1 )(II) WERE BROUGHT ON T O THE STATUTE TO PREVENT SUCH DIVERSION OF PROFITS TO THE SHAREHOLDERS WHO ARE OT HER WISE TO GET THE SAME AS PROFIT / DIVIDEND BY VIRTUE OF BEING SHAREHOLDERS OF THE COM PANY. IN THE PRESENT CASE ALSO THE ISSUE IS OF ALLOWABILITY OF COMMISSION PAID TO AN E MPLOYEE (DIRECTOR WHO IS ALSO SHAREHOLDER) AS PER PROVISIONS OF SECTION 36(1 )(II ) OF THE ACT. IN THE PRESENT CASE BEFORE ME. MR. ANSHUMAN MAGAZINE IS NOT ONLY MANAGING DIRE CTOR/EMPLOYEE OF THE APPELLANT COMPANY BUT IS ALSO THE SHAREHOLDER IN THE APPELLAN T COMPANY. IT IS OBSERVED FROM THE DETAILS FILED THAT AT THE TIME WHEN THE RESOLUTION WAS PASSED FOR PAYMENT OF COMMISSION TO SHRI ANSHUMAN MAGAZINE, HE WAS HAVING 99.99% SHARES OF THE APPELLANT COMPANY AND THE BALANCE 0.01% I.E. ONLY ONE SHARE WAS HELD BY H IS WIFE. MEANING THEREBY, THAT THE ENTIRE PROFITS EARNED BY THE APPELLANT COMPANY WERE TO GO TO SHRI ANSHUMAN MAGAZINE WHEN THE RESOLUTION WAS PASSED FOR PAYMENT OF COMMI SSION TO HIM. THIS GOES TO PROVE THAT THE SAID RESOLUTION WAS PASSED WITH THE SOLE I NTENTION TO AVOID PAYMENT OF TAX ON PAGE | 8 DISTRIBUTION OF DIVIDEND. IN CASE NO SUCH COMMISSIO N WAS PAID TO SHRI ANSHUMAN MAGAZINE, THEN THE COMMISSION PAID WOULD HAVE BEEN PAID TO HIM AS DISTRIBUTION OF PROFIT I.E. DIVIDEND AND IN THAT CASE PROFITS OF THE APPEL LANT COMPANY WOULD HAVE INCREASED BY THE AMOUNT OF COMMISSION CLAIMED BY IT. REVENUE WOU LD HAVE GOT 30% TAX ON SUCH COMMISSION WHICH IN FACT SHOULD NOT HAVE BEEN ALLOW ED HAVING BEEN PAID IN CONTRAVENTION OF THE PROVISIONS OF SECTION 36(1 )(I I) OF THE ACT. THIS ISSUE WAS FIRST EXAMINED ONLY WHEN ASSESSMENTS FOR AY 2007-08 AND A Y 2008-09 WERE TAKEN UP UNDER SCRUTINY AND SUCH COMMISSION PAID WAS DISALLOWED IN VOKING THE PROVISIONS OF SECTION 36(L)(II) OF THE ACT. BY THE AO. HOWEVER, THE ADDIT IONS SO MADE WERE DELETED BY THE LD. CIT(A) FOR THESE YEARS AND THE ACTION OF THE LD. CI T(A) HAS BEEN CONFIRMED BY THE HON'BLE ITAT IN THE APPEALS FILED BY THE DEPARTMENT . 4.3.8 FOR THE SAKE OF CONVENIENCE SUB-SECTION (II) OF SECTION 36(1) OF THE ACT IS REPRODUCED AS UNDER:- '(II) ANY SUM PAID TO AN EMPLOYEE AS BONUS OR COMMI SSION 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;) ' IF EACH WORD OF THE ABOVE SUB SECTION IS READ WITH THE INTENTION OF THE STATUTE WITH WHICH IT WAS INCORPORATED IN THE ACT. IT CAN BE NOTICED T HAT: 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 DIVIDEND IF IT HAD NOT BEEN PAID AS BONUS OR COMMISSION:) THE RESTRICTION THAT SUCH BONUS OR COMMISSION SHOUL D NOT HAVE BEEN PAYABLE TO EMPLOYEE AS PROFITS OR DIVIDEND HAS BEEN OBVIOUSLY DESIGNED TO CHECK, INTER-ALIA PRIVATE COMPANIES FROM AVOIDING TAX BY DISTRIBUTING THEIR P ROFITS TO THEIR MEMBERS / SHAREHOLDERS AS BONUS OR COMMISSION INSTEAD OF DIVIDENDS. THEREF ORE, WHAT IS TO BE SEEN IS THAT WHEN SUCH BONUS OR COMMISSION IS PAID TO AN EMPLOYEE WHO IS NOT TO GET THE SAME AS PROFIT OR DIVIDEND, THEN DEDUCTION U/S 36(1 )(II) SHALL BE AL LOWED, OTHERWISE NOT. 4.3.9 HOWEVER, IN THE PRESENT CASE BEFORE ME. IF THE SUM HAD NOT BEEN PAID AS BONUS OR COMMISSION TO SHRI ANSHUMAN MAGAZINE, IN THAT CASE SINCE HE WAS NOT ONLY THE EMPLOYEE BUT ALSO A SHAREHOLDER, HE WOULD HAVE GOT THAT AS A PROFIT OR DIVIDEND. THEREFORE, PAGE | 9 PROVISIONS OF SECTION 36(1 )(II) ARE CLEARLY ATTRAC TED IN THE PRESENT CASE AND THE AMOUNT PAID TO HIM AS COMMISSION SHOULD NOT HAVE BEEN ALLO WED U/S 36(1 )(II) OF THE ACT. 4.3.10 IT IS ALSO A MATTER OF RECORD THAT APPELLANT COMPANY HAS PAID SUBSTANTIAL AMOUNT AS COMMISSION TO ONE OF ITS DIRECTORS SHRI ANSHUMAN MAGAZINE. FOR THIS THE APPELLANT HAS RELIED ON THE BOARD RESOLUTION PASSED DATED 27. 05.2003 (PB 4) WHICH READS AS UNDER:- RESOLVED THAT PURSUANT TO ARTICLE 24 OF THE ARTICL ES OF ASSOCIATION OF THE COMPANY AND APPLICABLE PROVISIONS, IF ANY, OF THE COMPANIES ACT, 1956, MR . ANSHUMAN MAGAZINE BE AND IS HEREBY APPOINTED AS THE MANAGING DIRECTOR OF THE COMPANY WITH EFFECT FROM I S ' JUNE 2003 FOR A PERIOD OF FIVE (5) YEARS I.E. FRO M I S1 JUNE, 2003 TILL 31 ST MAY, 2008 WHICH MAY BE EXTENDED FURTHER AS DECIDED BY THE BOARD.' THUS EVEN ACCORDING TO THE ABOVE RESOLUTION. MR. AN SHUMAN MAGAZINE WAS NOT ENTITLED TO PAYMENT OF ANY COMMISSION AFTER 31 M MAY, 2008 AND THEREFORE, IF ANY COMMISSION IS PAID OUT OF THE PROFITS EARNED BY THE APPELLANT COMPANY FOR THE PERIOD 01.06.2008 TO 31.03.2009 IT IS NOT IN CONSONANCE WI TH THE SAID RESOLUTION PASSED. NO EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE APPELLAN T THAT THE ABOVE RESOLUTION WAS EXTENDED FOR A FURTHER PERIOD. FOR THIS REASON ALSO THE COMMISSION PAID TO MR. ANSHUMAN MAGAZINE IS NOT AN ALLOWABLE EXPENSE. IN ANY CASE, SUCH A RESOLUTION PASSED BY THE BOARD OF A COMPANY IN FAVOUR OF A SHAREHOLDER HAVIN G SUBSTANTIAL SHAREHOLDING IN THE COMPANY IS MERELY A SELF-SERVING, COLOURABLE DEVICE FOR EVADING TAX. 4.3.11 EVEN OTHERWISE, IF ANY RESOLUTION IS PASSED BY THE BOARD OF DIRECTORS WHICH IS CONTRARY TO LAW. IT CANNOT BIND THE REVENUE TO CONS IDER THE RESOLUTION PASSED FOR ANY PAYMENT AGREED TO BE MADE BY VIRTUE OF SUCH RES OLUTION. THIS FACT IS CONFIRMED FROM THE LETTER ISSUED BY THE MINISTRY OF CORPORATE AFFAIRS (MCA) WHICH HAS BEEN RELIED UPON BY THE APPELLANT COMPANY AND IS PLACED IN THE PAPER BOOK AT PAGE 110 WHICH HAS BEEN ISSUED BY MCA ON RE QUEST MADE BY THE APPELLANT COMPANY FOR WAIVER OF EXCESS MANAGERIAL R EMUNERATION PAID TO MR. ANSHUMAN MAGAZINE, MANAGING DIRECTOR OF THE APPELLA NT COMPANY WHO IS ALSO THE SHARE HOLDER OF THE APPELLANT COMPANY. THIS LETTER SPECIFICALLY STATES THAT THE APPROVAL ACCORDED IN THIS LETTER IS UNDER AND IN RE SPECT OF THE PROVISIONS OF THE COMPANIES ACT, 1956 AND SHOULD NOT BE CONSTRUED TO CONV EY THE APPROVAL OF THE PAGE | 10 CENTRAL GOVERNMENT OR ANY OTHER STATUTORY AUTHORITY UNDER IT, UNDER ANY OTHER LAW OR REGULATIONS. THEREFORE, REVENUE IS NOT BOUND TO ALLOW ANY PAYMEN T WHICH IS NOT ALLOWABLE UNDER THE SPECIFIC PROVISIONS OF THE I.T. ACT. 4.3.12 IN FACT THE RESOLUTION PASSED FOR ALLOWING COMMISS ION TO THE MANAGING DIRECTOR WAS PRE PLANNED AND WITH THE SOLE INTENTION TO AVOI D THE TAX LIABILITY BY CLAIMING AN EXPENSE WHICH IN FACT WAS NOT ALLOWABLE TO THE A PPELLANT COMPANY. THE APPELLANT COMPANY CLAIMED COMMISSION PAID TO ITS MA NAGING DIRECTOR AS EXPENSE AND IT IS ARGUED THAT THERE IS NO LOSS TO THE REVEN UE, SINCE THERE IS NO DIFFERENCE IN MAXIMUM RATE OF TAX CHARGEABLE IN THE CASE OF APPEL LANT COMPANY OR IN THE CASE OF THE DIRECTOR SHRI ANSHUMAN MAGAZINE, SINCE THE T AX BRACKET IS SAME. BUT THE FACTS ARE SOMEWHAT DIFFERENT. BY SHOWING PAYMENT MA DE TO THE MANAGING DIRECTOR AS COMMISSION, APPELLANT COMPANY HAS AVOID ED THE DIVIDEND DISTRIBUTION TAX WHICH WOULD HAVE BEEN PAID IN CASE NO SUCH EXPE NSE HAD BEEN PAID/ALLOWED, AS IN THAT CASE PROFIT WOULD HAVE INCREASED, AND TH E TAX WHICH IS CLAIMED TO HAVE BEEN PAID BY SHRI ANSHUMAN MAGAZINE, WOULD HAVE BEE N PAID ON INCREASED INCOME (ACTUAL INCOME) OF THE APPELLANT COMPANY. IN ADDITION THE INCREASED PROFITS DISTRIBUTED AS DIVIDEND WOULD ALSO BE SUBJE CTED TO DIVIDEND DISTRIBUTION TAX. IN THE PRESENT CASE, BY PASSING SUCH A RESOLUT ION AND SHOWING THAT IT IS COMMISSION FOR THE PERFORMANCE OF THE DIRECTOR IS J UST A CORPORATE VEIL, WHEREAS THE FACT IS THAT THE PERFORMANCE ACHIEVED IS NOT BE CAUSE OF ONE PERSON BUT IS AS A RESULT OF THE TEAM WORK OF MANPOWER EMPLOYED IN THE BUSINESS. MR. ANSHUMAN MAGAZINE WOULD HAVE RECEIVED ALMOST THE SAME AMOUNT AS DIVIDEND AT LEAST UPTO A.Y. 2007-08 WHICH HAS BEEN GIVEN TO HIM BY WAY OF COMMISSION, BUT IN THAT CASE THE APPELLANT COMPANY WOULD HAVE PAID TAX ON THE CO MMISSION EXPENSE WHICH IN FACT IS NOT TO BE ALLOWED AS PER PROVISIONS OF SECT ION 36(I)(II) OF THE ACT. IN ADDITION, IT WOULD ALSO HAVE PAID DIVIDEND DISTRIBU TION TAX. 4.3.13 IN VIEW OF MY ABOVE OBSERVATIONS, THIS FACT CANNOT BE IGNORED THAT THE COMMISSION HAS BEEN PAID TO A DIRECTOR WHO HAS SUBS TANTIAL SHARE HOLDING IN THE COMPANY AND SUCH COMMISSION SO CLAIMED TO HAVE BEEN PAID WHICH IN FACT IS NOT ALLOWABLE AS PER PROVISIONS OF SECTION 36(1 )(II). SHALL BE A PART OF THE PROFIT EARNED BY THE APPELLANT COMPANY. IN THAT CASE THE A PPELLANT COMPANY WOULD HAVE PAGE | 11 HAD TO PAY TAX ON INCREASED PROFIT BY THE AMOUNT OF COMMISSION EXPENSE CLAIMED TO HAVE BEEN PAID TO SHRI ANSHUMAN MAGAZINE, AND TH E APPELLANT COMPANY WOULD BE SUBJECT TO TAX ON DISTRIBUTION OF DIVIDEND AS WE LL. 4.3.14 THE APPELLANT HAS STATED IN PARA 5.7 OF THE STATEM ENT OF FACTS THAT SIMILAR INCENTIVE HAS BEEN PAID TO OTHER EMPLOYEES OF THE C OMPANY WHICH HAS BEEN ALLOWED AS DEDUCTION AS WOULD BE EVIDENT FROM THE C OMMISSION PAID TO SHRI MANISH KASHYAP TO WHOM INCENTIVE IS SHOWN TO HAVE B EEN PAID TO THE TUNE OF RS. 3.63.56,842/- BASED ON SALES. THE FACT CANNOT BE OV ERLOOKED THAT MR. MANISH KASHYAP IS NOT A SHARE HOLDER IN THE APPELLANT COMP ANY AND THEREFORE, HE IS NOT ENTITLED TO ANY DIVIDEND. THUS PAYMENT MADE TO MR. MANISH KASHYAP IS NOT HIT BY THE PROVISIONS OF SECTION 36(1 )(II) OF THE ACT SIN CE HE IS NOT A SHAREHOLDER AND IS NOT LIKELY TO GEL ANY PROFIT OF THE COMPANY. PROVIS IONS OF SECTION 36(L)(II) APPLY IN THE CASE OF A DIRECTOR SUBSTANTIAL SHARE HOLDER ONL Y. 4.3.15 THEREFORE, THE PROVISION CONTAINED IN SECTION 36(L) (II) IS SQUARELY APPLICABLE IN THE PRESENT CASE TO COMMISSION PAID TO MR. ANSHUMAN MAGAZINE. IN ORDER TO DETERMINE AS TO HOW MUCH PROFIT OF THE APPELLANT CO MPANY HAS BEEN DIVERTED UNDER THE GUISE OF COMMISSION EXPENSE CLAIMED TO HA VE PAID TO MR. ANSHUMAN MAGAZINE (DIRECTOR/SHAREHOLDER OF THE APPELLANT COM PANY), THE SAME IS WORKED OUT AS UNDER:- INCOME AS SHOWN BY THE APPELLANT 31,79,41,751 AMOUNT PAID TO MR. ANSHUMAN MAGAZINE 6,64,65,442 30% 1,99,39,632,6 TOTAL INCOME OF THE APPELLANT COMPANY 38,44,07,442 30% 11,53,22,158 ADD SURCHARGE 5% 57,66,107.9 TOTAL TAX PAYABLE 12,10,88,266 PROFIT FOR DISTRIBUTION 26,33,18,927 SHARE OF ANSHUMAN MAGAZINE 6,31,96,543 24% 6,64,65,442 AMOUNT GIVEN TO MR. ANSHUMAN AS COMMISSION AND INCENTIVE 3268899 PAGE | 12 DIFFERENCE WHICH COULD HAVE BEEN ALLOWED AS EXPENSES IN THE HANDS OF THE COMPANY (EVEN THIS WAS NOT TO BE PAID AS COMMISSION SINCE THE RESOLUTION PASSED ONLY FOR FIVE YEARS) 4.3.16 I FURTHER FIND THAT IN THE PRESENT ASSESSMENT YEAR UNDER CONSIDERATION THE PROFITS OF THE APPELLANT COMPANY ARE SUBSTANTIALLY REDUCED, WHICH HAVE COME DOWN TO RS. 26.74 CRORES AS COMPARED TO IMMEDIATELY PRECEDING Y EAR WHEREIN THE PROFITS ARE SHOWN AT RS. 37.06 CRORES DESPITE INCREASE IN TURNO VER FROM RS.243.14 CRORES TO RS.280.63 CRORES. NO MATERIAL REGARDING THE QUALIFI CATIONS OF SH. ANSHUMAN MAGAZINE AND THE EFFORTS MADE BY HIM TO INCREASE TH E PROFITABILITY OF THE COMPANY HAS BEEN ADDUCED BY-THE AR OF THE APPELLANT. THEREF ORE. 1 DO NOT FIND ANY FORCE IN ARGUMENTS OF THE APPELLANT COMPANY THAT THE INCREAS E IN TURNOVER OR PROFITS IS AS A RESULT OF MR. ANSHUMAN MAGAZINE, FOR WHICH EXPENS E PURPORTED TO BE COMMISSION PAID TO HIM IS CLAIMED, AND THEREFORE, T HE ADDITION MADE BY THE A.O. DISALLOWING THE CLAIM OF THE APPELLANT COMPANY IS S USTAINED. THESE GROUNDS OF APPEAL ARE THEREFORE, DISMISSED. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLE NGED THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SEC TION 36 (1) (II) OF THE IT ACT. HE SUBMITTED THAT UNDER IDENTICAL FACTS AND CIRCUMSTANCES THE ASSESSING OFFICER, IN THE PRECEDI NG ASSESSMENT YEAR, HAD MADE DISALLOWANCE BY INVOKING PROVISIONS OF SECTION 36 (1) (II) OF THE IT ACT, 1961 AND ON APPEAL BY THE R EVENUE, THE TRIBUNAL HAS DISMISSED THE APPEAL FILED BY THE REVE NUE. HE SUBMITTED THAT THE REVENUE HAS ACCEPTED THE ORDER O F THE PAGE | 13 TRIBUNAL AND NO APPEAL HAS BEEN PREFERRED AS PER HI S INFORMATION, SINCE NO APPEAL MEMO HAS BEEN SERVED U PON THE ASSESSEE. HE SUBMITTED THAT THE CTI(A) HAS NOT FOL LOWED THE ORDER OF THE TRIBUNAL ON THE GROUND THAT THE PRINCI PLE OF RE- JUDICATA IS NOT APPLICABLE TO INCOME TAX PROCEEDING S SINCE EACH ASSESSMENT YEAR IS SEPARATE ITSELF. HE SUBMITTED T HAT ONCE THE FACTS REMAIN THE SAME THEN IN VIEW OF DECISION OF H ONBLE APEX COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD. REPORTED IN 358 ITR 295, PRINCIPLE OF CONSISTENCY IS TO BE FOLLOWED . HE DREW THE ATTENTION OF THE BENCH TO THE FOLLOWING TABULAR CHA RT SHOWING THAT IDENTICAL CLAIM IN RESPECT OF INCENTIVE PAID TO SH. ANSHUMAN MAGAZINES, DIRECTOR OF THE ASSESSEE COMPANY STOOD A LLOWED AS SUCH : PAGE | 14 8. RELYING ON VARIOUS DECISIONS HE SUBMITTED THAT I N ABSENCE OF ANY APPEAL BY THE REVENUE CHALLENGING THE ORDER OF THE TRIBUNAL THE SAME IS BINDING. HE SUBMITTED THAT THE DISALLO WANCE MADE BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A) I S CONTRARY TO PRINCIPLE OF CONSISTENCY. HE SUBMITTED THAT ONCE T HE DEPARTMENT HAS ACCEPTED THE CLAIM IN PRECEDING AS WELL AS SUBS EQUENT YEARS THEN THE REVENUE IS BOUND BY THE PRINCIPLE OF CONSI STENCY. FURTHER THE INCENTIVE SO PAID TO SH. ANSHUMAN MAGAZ INE FOR A. Y. 2004-05 ONWARDS HAS BEEN ASSESSED AS SALARY EVEN UN DER SECTION 143 (3) OF THE IT, 1961 ACT FOR VARIOUS ASSESSMENT YEARS. FOR THE ABOVE PROPOSITION, THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE FOLLOWING TABLE :- PAGE | 15 SR. NO. A. Y. INCENTIVE (RS.) TOTAL SALARY (COMPUTATION OF INCOME AT PAGE OF PAPER BOOK) ASSESSMENT U/S. (PAGES OF PAPER BOOK) I) 2003 - 04 25,00,000 74,22,460 143 (1) II) 2004 - 05 1,19,48,350 1,82,95,160 143 (3) (93) III) 2005 - 06 1,91,75,160 2,69,01,560 143 (1) IV) 2006 - 07 3,81,76,000 4,72,10,880 143(3) (98) V) 2007 - 08 2,89,55,000 4,07,24,000 143(3) VI) 2008 - 09 6,47,27,888 7,67,27,888 (168-171) 143(3) (103) VII) 2009 - 10 5,44,65,442 6,62,49,942 (172-190) 143 (3) (105) (ISSUE UNDER CONSIDERATION) VIII) 2010 - 11 4,01,84,983 5,19,68,983 9. RELYING ON VARIOUS DECISIONS HE SUBMITTED THAT O NCE TAXES HAVE BEEN PAID BY THE DIRECTOR ON THE INCOME CLAIME D AS EXPENDITURE BY ASSESSEE COMPANY, NO DISALLOWANCE IS PERMISSIBLE VALIDLY UNDER THE ACT. FOR THE ABOVE PROPOSITION, HE RELIED ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CAS E OF CIT VS. SWADESHI INTERNATIONALS REPORTED IN 261 TAXMAN 430. RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F DCIT VS. PATEL ALLOY STEEL (P) LTD. REPORTED IN 262 TAXMAN 1 66 HE PAGE | 16 SUBMITTED THAT IN ABSENCE OF DISALLOWANCE MADE IN T HE PRECEDING YEARS AND NO CHANGE IN FACTS AND LAW, NO DISALLOWAN CE COULD BE MADE IN THE INSTANT YEAR. 10. HE SUBMITTED THAT NO PAYMENTS HAVE BEEN MADE TO THE OTHER SHARE HOLDERS NAMELY M/S. C.B. RICHARD ELLIS SOUTH ASIA (P). LTD. AND THEREFORE, SECTION 36(L)(II) OF THE A CT HAS NO APPLICATION. HE SUBMITTED THAT HONBLE DELHI HIGH COURT IN THE CASE OF AMD METPLAST (P) LTD. VS. DCIT REPORTED IN 341 ITR 563 HAS HELD THAT ONCE INCENTIVES HAS NOT BEEN DISPUTED IN THE RATIO OF SHAREHOLDING PATTERN, NO DISALLOWANCE CAN BE MAD E UNDER SECTION 36(L)(II) OF THE ACT. REFERRING TO THE ABO VE DECISION, HE SUBMITTED THAT IN THE SAID CASE, THE ASSESSEE HAD P AID COMMISSION OF RS. 25,00,000/- TO SHRI ASHOK GUPTA, MANAGING DIRECTOR OF THE ASSESSEE COMPANY WHICH WAS DISALLOW ED UNDER SECTION 36(L)(II) OF THE ACT. THE HONBLE HIGH COUR T HELD THAT ONCE THE PAYMENT HAS BEEN PAID IN TERMS OF THE BOARD RES OLUTION AND AS PART OF THE ENTITLEMENT TO RECEIVE COMMISSION ON THE SERVICES RENDERED ON WHICH TDS HAS BEEN DEDUCTED AND THE EMP LOYEES HAVE ALSO PAID TAXES ON THE SAID SUM THEN NO DISALL OWANCE CAN BE MADE UNDER SECTION 36(1)(II) OF THE ACT. HE DREW TH E ATTENTION OF THE BENCH TO THE FOLLOWING OBSERVATIONS OF THE HON BLE HIGH COURT : DIVIDEND HAS TO BE PAID TO ALL SHAREHOLDERS EQUALLY. THIS POSITION CANNOT BE DISPUTED BY THE REVENUE. DIVIDEND IS A RETURN ON INVESTMENT AND NOT SALARY OR PART THEREOF. HEREIN THE CONSIDERATION IN THE FORM OF PAGE | 17 COMMISSION WHICH WAS PAID TO ASHOK GUPTA WAS FOR SERVICES RENDERED BY HIM AS PER TERMS OF APPOINTMENT AS A MANAGING DIRECTOR. 11. HE SUBMITTED THAT SIMILAR VIEW HAS BEEN EXPRES SED BY THE HONBLE HIGH COURT IN THE CASE OF CONTROLS & SWITCH GEAR CONTACTORS LTD. VS. DCIT REPORTED IN 269 CTR 44. 12. REFERRING TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. CAREER LAUNCHER INDIA LTD REPORTED I N 358 ITR 179 HE SUBMITTED THAT HERE ALSO FOLLOWING THE ABOVE JUD GMENT, DISALLOWANCE MADE WAS DELETED. HE SUBMITTED THAT TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HOWEVER HAS HE LD THAT THE RESOLUTION PLACED ON RECORD COULD NOT BE ACCEPTED A S ON THE DATE OF PASSING OF RESOLUTION ON 27.05.2003, SH. ANSHUMA N MAGAZINE WAS HOLDING 99.99% SHAREHOLDING AND DISTRIBUTION OF PROFITS IN THE SHAPE OF COMMISSION WAS DONE WITH SOLE INTENTIO N TO AVOID DIVIDEND DISTRIBUTION TAX WHICH OTHERWISE WAS TO BE PAID BY THE ASSESSEE COMPANY AND SUCH FINDING IS WHOLLY MISCONC EIVED AND UNTENABLE PARTICULARLY WHEN ON THE BASIS OF IDENTIC AL RESOLUTION IN THE PRECEDING ASSESSMENT YEAR, DEDUCTION CLAIMED STANDS ALLOWED EVEN BY THE HONBLE TRIBUNAL AND BY THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS). HE SUBMITTED THAT IN THE SUCCEEDING YEAR ALSO, IDENTICAL CLAIM OF INCENTIVE PAID HAS BEEN ALLOWED AS SUCH IN ASSESSMENT FRAMED UNDER SECTION 143(3) OF THE ACT. HE SUBMITTED THAT THE OBSERVATION IN PARA 4.3. 4 (PAGE 23 OF ORDER OF CIT(A) THAT FACTUM OF PASSING OF RESOLUTIO N ON THE DATE WHEN SH. ANSHUMAN MAGAZINE HELD 99.99% SHAREHOLDING AND PAGE | 18 ESCAPED ATTENTION IS WHOLLY MISCONCEIVED. THERE IS NO JUSTIFICATION TO PROCEED ON SUCH A PRESUMPTION. IN ANY CASE, HAVI NG NOT FILED AN APPEAL AGAINST THE ORDER OF HONBLE TRIBUNAL, TH E CONCLUSION IS WHOLLY MISCONCEIVED. REFERRING TO THE ORDER OF CIT( A) HE SUBMITTED THAT IT IS ALSO HELD BY THE LEARNED CIT(A ) THAT THE RESOLUTION IS UPTO 31.5.2008 AND THEREFORE, COMMISS ION PAID OUT OF THE PROFITS FOR THE PERIOD 1.6.2008 TO 31.03.200 9 IS UNSUBSTANTIATED. HE SUBMITTED THAT HERE TOO, ONCE THE LEARNED CIT(A) HAS NOTED THAT THIS SUM WAS PART OF REMUNERA TION PAID BY THE ASSESSEE TO SH. ANSHUMAN MAGAZINE FOR WHICH, WA IVER OF COST REMUNERATION WAS OBTAINED FROM MINISTRY OF CORPORAT E AFFAIRS DATED 18.7.2011, THE CONCLUSION THAT IT IS NOT FOR SERVICES RENDERED IS MISCONCEIVED. HE SUBMITTED THAT IDENTI CAL WAIVER OF COST REMUNERATION WAS THERE IN ASSESSMENT YEAR 2008 -09 AS WOULD BE EVIDENT FROM THE PERMISSION DATED 18.7.201 1 PLACED AT PAGE 106 OF PAPER BOOK AND THEREFORE, THE ASSUMPTION IS WHOLLY MISCONCEIVED. IN ANY CASE, ONCE THE ASSESSEE HAS DE CLARED THE SAID SUM AS SALARY IN HIS HANDS WHICH STANDS ACCEPT ED UNDER SECTION 143(3) OF THE ACT, THE BASIS ADOPTED TO DIS ALLOW THE CLAIM OF DEDUCTION IS NOT IN ACCORDANCE WITH LAW AND THER EFORE, UNTENABLE. HE SUBMITTED THAT EVEN THE TABULATION PR EPARED AT PAGE 29 (PARA 4.3.15) IS INCORRECT. HE SUBMITTED TH AT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS TAKEN THE INCOME AS SHOWN IN THE RETURN OF INCOME AND THEN ADDED THE SU M PAID TO SH. ANSHUMAN MAGAZINE AND ASSUMED THAT TOTAL PROFIT AVAILABLE FOR DISTRIBUTION WAS RS. 26.33 CRORES AND THUS HELD THAT 24% SHARE OF SH. ANSHUMAN MAGAZINE WAS RS. 6.31 CRORES AS AGAINST PAGE | 19 WHICH, HE HAS BEEN PAID RS. 6.64 CRORES. HE SUBMIT TED THAT FIRSTLY, THERE IS NO JUSTIFICATION TO ARRIVE AT SUC H A CONCLUSION. THE AFORESAID APPROACH IS WHOLLY MISCONCEIVED FOR THE F OLLOWING REASONS: A) THAT NO REMUNERATION HAS BEEN PAID TO ANY OTHER SHAREHOLDER AND THEREFORE, SAID SUM CANNOT BE DEEME D AS DIVIDEND OR PROFIT UNDER SECTION 36(L)(II) OF THE A CT AND THEREFORE, SUM PAID TO SH. ANSHUMAN MAGAZINE STANDS ASSESSED AS SALARY IN THE HANDS OF SH. ANSHUMAN MAG AZINE UNDER SECTION 143(3) OF THE ACT; B) INCENTIVE PAID IN THE INSTANT YEAR TO SH. ANSHUMAN MAGAZINE IN IDENTICAL MANNER STANDS ALLOWED AS DEDU CTION INCLUDING BY THE ORDER OF HONBLE TRIBUNAL FOR WHIC H, NO APPEAL HAS BEEN PREFERRED BY THE APPELLANT; C) IDENTICAL INCENTIVE PAID IN THE SUCCEEDING YEAR STA NDS ALSO ACCEPTED BY THE ASSESSING OFFICER IN ASSESSMENT FRA MED UNDER SECTION 143(3) OF THE ACT; AND, D) IDENTICAL INCENTIVE PAID TO OTHER EMPLOYEE WAS ALSO ALLOWED AS DEDUCTION. HE SUBMITTED THAT EVEN OTHERWISE, A CHART OR TABULA TION PREPARED IS BASED ON FUNDAMENTAL MISCONCEPTION AND OTHERWISE TOO, CANNOT BE A GROUND TO ASSUME THAT SU M PAID WAS PROFIT OR DIVIDEND. 12. THE LD. COUNSEL FOR THE ASSESSEE WITHOUT PREJUD ICE TO THE ABOVE SUBMITTED THAT EVEN OTHERWISE, PROFIT AS PER PROFIT AND LOSS ACCOUNT WAS RS. 26.78 CRORES AND EVEN ASSUMING, THE ENTIRE SUM PAGE | 20 IS PROFIT AND DIVIDEND THEN TOTAL SUM WAS RS. 33.38 CRORES OUT OF WHICH, IF TAXES ARE REDUCED OF RS. 11.78 CRORES THE N NET SURPLUS AVAILABLE IS RS. 21.70 CRORES AGAINST WHICH, SHARE OF SH. ANSHUMAN MAGAZINE WOULD BE RS. 5.21 CRORES AND NOT RS. 6.64 CRORES AND THUS, EVEN OTHERWISE, THE PREPOSTEROUS T HEORY PROPOUNDED BY THE LEARNED CIT(A) IS MISCONCEIVED. HE SUBMITTED THAT SINCE THE WHOLE ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL AND ASSESSMENT FRAMED UNDER SECTION 143(3) OF THE A CT AND ORDER MADE IN THE CASE OF SH. ANSHUMAN MAGAZINE, THE DISA LLOWANCE MADE IS UNTENABLE. HE ACCORDINGLY SUBMITTED THAT TH E ADDITION MADE BY THE ASSESSING OFFICER AND UPHELD BY THE CIT (A) SHOULD BE DELETED. THE LD. DR ON THE OTHER HAND HEAVILY RE LIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE PRINCIP LE OF RE-JUDICATA IS NOT APPLICABLE TO INCOME TAX PROCEEDINGS AND EAC H YEAR IS DIFFERENT. HE SUBMITTED THAT THE LD. CIT(A) HAS DI STINGUISHED THE ORDERS OF THE PRECEDING YEARS AND, THEREFORE, THE S AME SHOULD BE UPHELD. 13. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSE SSING OFFICER IN THE INSTANT CASE INVOKING THE PROVISIONS OF SECTION 36 (1) (II) OF THE IT ACT, 1961, MADE ADDITION OF RS.6,64,65,442/- TO THE TOTAL INCOME OF THE ASSESSEE BEING THE AMOUNT OF COMMISSI ON AND EX- GRATIA PAID TO ONE OF THE DIRECTOR SH. ANSHUMAN MAG AZINE WHO IS A SHARE HOLDER OF THIS COMPANY HOLDING 24% SHARE HO LDING. ACCORDING TO THE ASSESSING OFFICER SIMILAR ADDITION S MADE IN A. Y. PAGE | 21 2007-08 AND 2008-09 WERE DELETED BY THE CIT(A) BUT THE DEPARTMENT HAD NOT ACCEPTED THE SAME AND THE MATTER IS PENDING BEFORE THE TRIBUNAL. HE FURTHER HELD THAT IN THE IN STANT CASE NO DIVIDEND HAS BEEN DECLARED BY THE ASSESSEE COMPANY WHEREAS IT HAS PAID SALARY AND OTHER ALLOWANCES TO ITS DIRECTO RS WHICH ALSO INCLUDES BONUS / EX-GRATIA WHICH IS NOTHING BUT TO REDUCE THE TAXABLE INCOME OF THE ASSESSEE COMPANY AND TO AVOID DIVIDEND DISTRIBUTION TAX. WE FIND THE LD. CIT(A) DISTINGUI SHING THE ORDERS OF HIS PROCEDURE AND THE ORDER OF THE TRIBUNAL UPHE LD THE ACTION OF THE ASSESSING OFFICER, THE REASONS FOR WHICH HAV E ALREADY BEEN REPRODUCED IN THE PRECEDING PARAGRAPHS. WE FIND TH E FACTS OF THE IMPUGNED ASSESSMENT YEAR ARE IDENTICAL TO THE FACTS OF THE PRECEDING AS WELL AS SUBSEQUENT YEARS. WE FIND THE TRIBUNAL IN ASSESSEES OWN CASE FOR A. Y. 2007-08, 2008-09 VIDE ITA NO. 709/DEL/2012 AND 795/DEL/2013 ORDER DATED 07.03.201 6 HAS DELETED SUCH DISALLOWANCES AND THE REVENUE HAS NOT FILED ANY APPEAL AGAINST THE ORDER OF THE TRIBUNAL DELETING S UCH DELETION. THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IN ASSESSMENT YEAR 2010-11, THE INCENTIVE OF RS.4,01,8 4,983/- AND SALARY OF RS.1,15,28,400/- BOTH TOTALING TO RS.5,29 ,68,983/- HAS BEEN ALLOWED IN THE ORDER PASSED U/S. 143 (3) COULD NOT BE CONTROVERTED BY THE LD. DR. SIMILARLY THE SUBMISSI ON OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSING OFFICER HAS ALLOWED THE PAYMENT OF RS.6,84,08,003/- FOR A. Y. 2011-12, RS.7,75,03,229/- FOR A. Y. 2012-13, RS.8,02,22,620/ - FOR A. Y.2012-13 AND RS.8,44,07,484/- FOR A. Y. 2014-15 IN THE ORDER PASSED U/S. 143 (3) ALSO COULD NOT BE CONTROVERTED BY THE LD. DR. PAGE | 22 SINCE THE COMMISSION PAID TO SH. ANSHUMAN MAGAZINE, DIRECTOR OF THE ASSESSEE COMPANY WAS DELETED BY THE CIT(A) I N THE PRECEDING YEARS AND THE ORDER OF THE TRIBUNAL DISMI SSING THE APPEAL FILED BY THE REVENUE HAS NOT BEEN CHALLENGED BY THE REVENUE IN THE PRECEDING TWO YEARS AND FURTHER CONS IDERING THE FACT THAT THE ASSESSING OFFICER IN THE ORDERS PASSE D U/S. 143 (3) FOR SUBSEQUENT ASSESSMENT YEARS FROM 2010-11 TO 201 4-15 HAS ALLOWED SIMILAR COMMISSION/ INCENTIVE, THEREFORE, F OLLOWING THE RULE OF CONSISTENCY, WE ARE OF THE CONSIDERED OPINI ON THAT NO DISALLOWANCE U/S. 36 (1) (II) OF THE IT ACT IS CALL ED FOR IN THE INSTANT CASE. WE, THEREFORE, SET ASIDE THE ORDER O F THE CIT(A) ON THIS ISSUE AND ALLOW THE GROUNDS OF APPEAL NO. 1 TO 1.3 RAISED BY THE ASSESSEE. 14. GROUND NO.2 TO 2.3 ARE AS UNDER :- 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS FURTHER ERRED BOTH IN LAW AND ON FACTS IN CONFIRMIN G AN ADDITION OF RS.7,77,69,909/- ON ACCOUNT OF ALLEGED EXCESSIVE CL AIM OF REMUNERATION. 2.1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS FAILED TO APPRECIATE THAT DISALLOWANCE PERTAINING T O ASSESSMENT YEAR 2008-09 OF RS.3,04,30,061/- COULD NOT BE DISALLOWED IN THE INSTANT YEAR AS NO EXPENDITURE HAS BEEN CLAIMED IN THE INST ANT YEAR. 2.2 THAT FINDING THAT ANY PAYMENT MADE OF MANAGERI AL REMUNERATION TO THE MANAGING DIRECTOR IN CONTRAVENT ION OF THE PROVISIONS OF THE COMPANIES ACT, EVEN IF WAIVED CAN NOT BE CONSIDERED TO BE AN ALLOWABLE EXPENSE UNDER THE IT ACT, IF IT WAS NOT FOR THE PURPOSE OF BUSINESS OF THE APPELLANT COMPAN Y AND WAS ONLY A DEVICE TO REDUCE THE TAX LIABILITY, WHICH IS THE CASE WITH THE PAGE | 23 APPELLANT. THEREFORE, THE EXCESS AMOUNT OF MANAGER IAL REMUNERATION PAID TO SHRI ANSHUMAN MAGAZINE WHICH A MOUNTS TO RS.4,73,39,848/- IS NOT ALLOWABLE AS THE SAME IS NO T RELATING TO THE BUSINESS OF THE APPELLANT IS FACTUALLY AND LEGALLY ERRONEOUS AND THUS UNTENABLE. 2.3 THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS FAILED TO APPRECIATE THAT MANAGERIAL REMUNERATION A PPROVED BY CENTRAL GOVERNMENT CAN BE NO GROUND MUCH LESS VALID GROUND TO DENY THE CLAIM OF LEGITIMATE EXPENDITURE INCURRED O N ACCOUNT OF COMMERCIAL EXPEDIENCY FOR SERVICES RENDERED IN THE COURSE OF BUSINESS OF THE APPELLANT COMPANY. 15. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED T HAT THE ASSESSEE HAS CLAIMED RS.3,04,30,061/- AND RS.4,73,3 9,848/-, TOTALING TO RS.7,77,69,909/- SHOULD NOT ON ACCOUNT OF REMUNERATION. THE ASSESSING OFFICER ASKED THE ASSE SSEE TO SHOW CAUSE AS TO WHY EXCESS REMUNERATION OF RS.7,77,69,9 09/- BE DISALLOWED FOR WHICH STATUTORY APPROVAL WERE NOT OB TAINED BY THE ASSESSEE. IN RESPONSE TO THE SAME, THE ASSESSEE, VI DE LETTER DATED 13.02.2013 SUBMITTED AS UNDER : THE ASSESSEE COMPANY HAD PAID MANAGERIAL REMUNERATION IN EXCESS OF LIMIT SPECIFIED IN THE CO MPANIES ACT AMOUNTING TO RS.3,04,30,061 AND RS.4,73,39,848 FOR THE YEAR ENDING 31.03.2008 RESPECTIVELY. IN RESPECT OF THE SAME WE WOULD LIKE TO INTIMATE Y OUR GOOD SELF THAT THE RECOVERY OF EXCESS MANAGERIAL REMUNERATION HAS BEEN WAIVED OFF BY THE CENTRAL PAGE | 24 GOVERNMENT. APPROVAL LETTER ISSUED BY THE CENTRAL GOVERNMENT REGARDING THE WAIVER OF RECOVERING SUCH EXCESS MANAGERIAL REMUNERATION IS BEING ENCLOSED AS ANNEXURE M FOR YOUR KIND PERUSAL. 16. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIE D WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE. HE REFERRED TO ANNEXURE M WHICH IS THE LETTER ISSUED BY THE DEPU TY SECRETARY TO THE GOVERNMENT OF INDIA, MINISTRY OF C ORPORATE AFFAIRS DATED 18 TH JULY 2011 WHICH IS MUCH AFTER THE DATE ON WHICH SUCH REMUNERATION HAS BEEN PAID BY THE ASSESS EE COMPANY OR FILING OF RETURN. THE ASSESSEE COMPANY FAILED TO PROVIDE PRIOR APPROVAL OF REMUNERATION EXPENSES. I N VIEW OF THE ABOVE, THE ASSESSING OFFICER DISALLOWED THE AMO UNT OF RS.7,77,69,909/-. 17. IN APPEAL THE LD. CIT(A) UPHELD THE ACTION OF T HE ASSESSING OFFICER BY OBSERVING AS UNDER :- 5.4.1 1 HAVE EXAMINED THE OBSERVATIONS MADE BY THE AO IN THE IMPUGNED ASSESSMENT ORDER AS WELL AS SUBMISSIONS MA DE BY THE APPELLANT ON THE ABOVE ADDITION MADE. THE ADDITION MADE BY THE AO IS WITH REGARD TO EXCESS REMUNERATION PAID TO MR. A NSHUMAN MAGAZINE OF RS. 4.73.39.848/- WHICH RELATES TO AY 2 009-10 AND RS. 3.04.30.061/- WHICH RELATES TO A.Y. 2008- 09, CLAIM ED TO BE PART OF PAYMENT MADE TO SHRI ANSHUMAN MAGAZINE OF RS. 6,47. 27.288/- RELATING TO A.Y. 2008-09 AND RS. 6.64.64.442 - RELA TING TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IN ANY CASE, A CLAIM PERTAINING TO AN EARLIER YEAR CANNOT BE ALLOWED IN THE YEAR UNDER PAGE | 25 APPEAL AND THEREFORE, THE AMOUNT OF RS. 3.04,30.061 /- RELATING TO A.Y. 2008-09 DESERVES TO BE DISALLOWED IN CASE IT H AS BEEN MADE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. AS REGARDS THE OTHER AMOUNT OF RS. 4,73,39,848/- I. E. THE EXCESS REMUNERATION PAID TO MR. ANSHUMAN MAGAZINE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. 1 FIND THAT THIS FACT CAN NOT BE BRUSHED ASIDE THAT THE PAYMENT MADE OF RS. 4.73.39,848/- CL AIMED BY THE APPELLANT TO BE FORMING PART OF THE PAYMENT MADE OF RS. 6.64.65.442/- FOR THE ASSESSMENT YEAR UNDER CONSIDE RATION IS EXCESS MANAGERIAL REMUNERATION PAID TO SHRI ANSHUMA N MAGAZINE. MANAGING DIRECTOR OF THE COMPANY. 1 HAVE ALSO EXAMI NED THE ORDER FOR WAIVER ISSUED BY THE MINISTRY OF CORPORATE AFFA IRS DATED 18 TH JULY, 2011. WHICH STATES CLEARLY THAT APPROVAL ACCO RDED IN THAT LETTER IS UNDER AND IN RESPECT OF THE PROVISIONS OF THE CO MPANIES ACT, 1956 AND SHOULD NOT BE CONSTRUED TO CONVEY THE APPROVAL OF THE CENTRAL GOVERNMENT OR ANY OTHER STATUTORY AUTHORITY UNDER IT, UNDER ANY OTHER LAW OR REGULATIONS FOR THE TIME BEING IN FORCE IN R ESPECT WHEREOF THE COMPANY WILL NO DOUBT TAKE APPROPRIATE ACTION AS REQUIRED BY LAW . 5.4.3 THUS, ANY PAYMENT MADE OF MANAGERIAL REMUNERA TION TO THE MANAGING DIRECTOR IN CONTRAVENTION OF THE PROVISION S OF THE COMPANIES ACT. EVEN IF WAIVED, CANNOT BE CONSIDERED TO BE AN ALLOWABLE EXPENSE UNDER THE I.T. ACT IF IT WAS NOT FOR THE PURPOSE OF BUSINESS OF THE APPELLANT COMPANY AND WAS ONLY A DE VICE TO REDUCE THE TAX LIABILITY, WHICH IS THE CASE WITH THE APPEL LANT, AS HELD IN THE FOREGOING PARAS. THEREFORE, THE EXCESS AMOUNT OF MA NAGERIAL REMUNERATION PAID TO SHRI ANSHUMAN MAGAZINE WHICH A MOUNTS TO RS. 4,73,39.848/- IS NOT ALLOWABLE AS THE SAME IS N OT RELATING TO THE BUSINESS OF THE APPELLANT. HOWEVER, THE A.O. MAY EN SURE THAT NO PAGE | 26 DOUBLE ADDITION OF THE SAME INCOME IS MADE. THIS GR OUND OF APPEAL IS DISPOSED OF ACCORDINGLY. 18. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE AS SESSE IS IN APPEAL BEFORE THE TRIBUNAL. 19. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALL ENGED THE ORDER OF THE CIT(A) IN SUSTAINING THE ADDITION SO M ADE BY THE ASSESSING OFFICER. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET DREW THE ATTENTION OF THE BENCH TO THE FOLLOWING TA BLE : 20. HE SUBMITTED THAT THE DISALLOWANCE OF RS.3,04,3 0.61/- WAS CLAIMED BY THE ASSESSEE IN THE PRECEDING ASSESSMENT YEAR 2008- 098 AND NOT IN THE INSTANT ASSESSMENT YEAR 2009-10, THEREFORE, THE DISALLOWANCE IS PATENTLY INCORRECT. PAGE | 27 21. SO FAR AS THE DISALLOWANCE OF RS.4,73,39,840/- IS CONCERNED HE SUBMITTED THAT THIS IS THE PART OF THE TOTAL REM UNERATION TO THE MANAGING DIRECTOR WHICH IS ALREADY DISALLOWED U/S. 36 (1) (II) OF THE IT ACT AND THUS AMOUNTS TO DOUBLE ADDITION OF T HE SAME AMOUNT. RELYING ON VARIOUS DECISIONS HE SUBMITTED T HAT DOUBLE ADDITION IS NOT PERMISSIBLE IN LAW. EVEN OTHERWISE HE SUBMITTED THAT THE DISALLOWANCE BY THE ASSESSING OFFICER ON T HE BASIS THAT THE ASSESSEE COMPANY FAILED TO PROVIDE PRIOR APPROV AL OF REMUNERATION EXPENSES IS NOT IN ACCORDANCE WITH LAW . 22. RELYING ON VARIOUS DECISIONS HE SUBMITTED THAT MERE ALLEGED INFRACTIONS UNDER OTHER STATUTES CANNOT BE MADE A B ASIS TO MAKE A DISALLOWANCE UNDER INCOME TAX ACT 1961. HE FURTH ER SUBMITTED THAT IN ABSENCE OF SATISFACTION OF CONDITIONS U/S. 40 A (2) (B) OF THE IT ACT, 1961 DISALLOWANCE MADE IS NOT IN ACCORD ANCE WITH LAW. 23. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMIT TED THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS UP HELD THE DISALLOWANCE ON FUNDAMENTAL MISCONCEPTION THAT ANY PAYMENT MADE OF MANAGERIAL REMUNERATION TO THE MANAGING DIR ECTOR IN CONTRAVENTION OF THE PROVISIONS OF THE COMPANIES AC T, EVEN IF WAIVED, CANNOT BE CONSIDERED TO BE AN ALLOWABLE EXP ENSE UNDER THE INCOME TAX ACT IF IT WAS NOT FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE COMPANY AND WAS ONLY A DEVICE TO REDUC E THE TAX LIABILITY. HE SUBMITTED THAT THERE IS NO FINDING O F THE ASSESSING OFFICER THAT THE EXPENDITURE INCURRED WAS NOT FOR T HE PURPOSE OF BUSINESS OF THE ASSESSEE. INFACT, IDENTICAL EXPENDI TURE STOOD PAGE | 28 ALLOWED IN THE PRECEDING ASSESSMENT YEAR AND SUCCEE DING ASSESSMENT YEAR AND THEREFORE, ANY SUCH SUGGESTION IS MISCONCEIVED. HE SUBMITTED THAT ONCE THE ENTIRE SAL ARY STANDS TAXED AS INCOME IN THE HANDS OF SH. ANSHUMAN MAGAZI NE, NO DISALLOWANCE SHOULD BE MADE IN THE INSTANT YEAR. IN ANY CASE, IN ABSENCE OF ANY MATERIAL TO SUGGEST THAT IT IS NOT F OR THE PURPOSE OF BUSINESS OF ASSESSEE, DISALLOWANCE IS WHOLLY UNC ALLED FOR. HE ACCORDINGLY SUBMITTED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A) SHOULD B E DELETED. 24. THE LD. DR ON THE OTHER HAND STRONGLY RELIED ON THE ORDER OF THE CIT(A). 25. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDER4D THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSE SSING OFFICER MADE DISALLOWANCE TO RS.7,77,69,909/- BEING EXCESS REMUNERATION PAID TO THE DIRECTORS. WE FIND THE LD . CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER, THE REASON OF WHICH HAS ALREADY BEEN REPRODUCED IN THE PRECEDING PARAGRAPHS . IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IN THE ASSESSMENT YEAR 2008-09 AMOUNT OF RS.6,47,27,888/- WAS DISALLOWED U/S. 36 (1) (II) OF THE IT ACT, 1961 WHI CH INCLUDED THE AMOUNT OF EXCESS REMUNERATION OF RS.3,04.30,061. TH EREFORE, AGAIN THE SAME AMOUNT CANNOT BE BROUGHT TO TAX IN T HE IMPUGNED ASSESSMENT YEAR. WE FIND MERIT IN THE ABO VE ARGUMENT PAGE | 29 OF THE LD. COUNSEL FOR THE ASSESSEE. FROM THE DETA ILS FURNISHED BY THE ASSESSEE, IT IS SEEN THAT THE AMOUNT OF RS.3,04 ,30,061/- WAS A PART OF THE AMOUNT OF RS.6,47,27,888/- BEING THE AMOUNT OF DISALLOWANCE U/S. 36 (1) (II) OF THE IT ACT, 1961 F OR A. Y.2 008-09. WE, THEREFORE, RESTORE THIS PART OF THE DISALLOWANC E TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION AND IF THE A BOVE AMOUNT WAS A PART OF DISALLOWANCE MADE U/S. 36 (1) (II) OF THE IT ACT, 1961 OF RS.4,47,27,888/- THEN IT RELATES TO A. Y. 2008-09 A ND CANNOT BE DISALLOWED DURING THE CURRENT YEAR. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AS PER FACT AND LAW AFTER GIVING D UE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. 26. SO FAR AS THE AMOUNT OF RS.4,73,39,848/- BEING THE EXCESS REMUNERATION PAID TO SH. ANSHUMAN MAGAZINE IS CONCE RNED, WE FIND THE ASSESSEE HAS OBTAINED APPROVAL OF THE COMP ETENT AUTHORITY THOUGH ON 18.07.2011 I.E. MUCH AFTER THE DATE ON WHICH SUCH REMUNERATION HAS BEEN PAID. IN OUR OPINION AL THOUGH THE APPROVAL HAS BEEN OBTAINED AFTER DATE OF PAYMENT, H OWEVER IT WILL RELATE BACK TO THE YEAR UNDER CONSIDERATION. SINCE THE APPROVAL WAS GRANTED BY THE COMPETENT AUTHORITY VIDE LETTER DATED 18.07.2011 FOR THREE FINANCIAL AT A TIME I.E. FINAN CIAL YEAR 2007- 08, 2008-09 AND 2009-10, THEREFORE, IT IS WRONG ON THE PART OF THE ASSESSING OFFICER AND THE CIT(A) TO HOLD THAT REMUN ERATION IS NOT ALLOWABLE SINCE THE APPROVAL HAS BEEN OBTAINED AFT ER THE PAYMENT OF REMUNERATION TO THE CONCERNED DIRECTOR. WE FURTHER FIND THAT THE ABOVE AMOUNT WAS A PART OF RS.6,64,64 ,442/- WHICH WAS DISALLOWED BY THE ASSESSING OFFICER U/S. 36 (1) (II). HOWEVER, PAGE | 30 WE HAVE ALREADY DELETED SUCH DISALLOWANCES. WE FIN D THERE IS NO FINDING OF THE ASSESSING OFFICER AND CIT(A) THAT TH E EXPENDITURE INCURRED IS NOT FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. WE FIND SIMILAR EXPENDITURE HAS BEEN ALLOWED BY THE AS SESSING OFFICER IN THE PRECEDING AND SUCCEEDING ASSESSMENT YEARS. FURTHER THE AMOUNT HAS ALREADY SUFFERED TO TAX IN T HE HANDS OF SH. ANSHUMAN MAGAZINE. IN VIEW OF THE ABOVE DISCUS SION WE ARE OF THE CONSIDERED OPINION THAT THE DISALLOWANCE OF RS.4,73,39,848/- IS NOT JUSTIFIED UNDER THE FACTS A ND CIRCUMSTANCES OF THE CASE. WE, THEREFORE, SET ASID E THE ORDER OF LD. CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING O FFICER TO DELETE THE ADDITION. GROUND NO.2 TO 2.3 ARE ACCORDINGLY AL LOWED FOR STATISTICAL PURPOSE. 27. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 28.06.2019. SD/- SD/- (SUCHITRA KAMBLE) (R.K PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER *NEHA* DATE : 28.06.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ] PAGE | 31 DATE OF DICTATION 24.06.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 25.06.2019 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 01.07.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER