ACIT, New Delhi V. M/s. Clients Forgings (P) Ltd, Faridabad

ITA 4553/DEL/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5633 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-02-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 03-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMEBR AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER I.T.A NO. 4553/DEL/09 ASSESSMENT YEAR 2006-07 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 3 (1), NEW DELHI. VS. M/S. CLIENTS FORGINGS (P) LTD., 13/3, MATHURA ROAD, FARIDABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANISH GUPTA, DR RESPONDENT BY : SHRI K.V. S. GUPTA, CA ORDER PER RAJPAL YADAV, JM: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LD. CIT (A) DATED 17 TH SEPTEMBER, 2009 PASSED FOR ASSTT. YEAR 2006-07. THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT LD. C IT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 21,65,662/- WHICH HAS BEEN DISALLOWED BY THE ASSESSEE OUT OF THE BONUS AND COMMISSION PAI D TO THE DIRECTORS ON THE GROUND THAT IT WAS NOT AN ALLOWABL E EXPENDITURE WITHIN THE MEANING OF SECTION 36 (1)(II)OF THE INCO ME TAX ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA D PAID COMMISSION AND BONUS OF RS. 13,27,160/- AND RS. 8,3 8,502/- RESPECTIVELY TO ITS DIRECTORS. THIS AMOUNT HAS BEEN DISALLOWED TO ITA NO. 4684/DEL/09 ASSTT. YEAR 2006-07 2 THE ASSESSEE BY THE AO WITH THE HELP OF SECTION 36( 1)(II) OF THE INCOME TAX ACT ON THE GROUND THAT HAD IT NOT BEEN P AID TO THE DIRECTORS BY WAY OF BONUS AND COMMISSION IT WOULD H AVE BEEN PAID IN THE SHAPE OF DIVIDEND / PROFIT OF THE COMPA NY TO THOSE DIRECTORS IN THE RATIO OF THEIR SHARE HOLDING. 3. LD CIT(A) HAS DELETED THE DISALLOWANCE BY FOLLOW ING THE ORDER OF ITAT PASSED IN ASSTT. YEAR 2004-05. 4. LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT A SIMILAR ISSUE WAS AGITATED IN EARLIER YEARS . THE TRIBUNAL HAS DELETED THE DISALLOWANCE IN ASSTT. YEAR 2004-05 AS WELL AS 2005-06. HE PLACED ON RECORD COPY OF THE TRIBUNALS ORDER IN ITA NO. 3927/DEL/2009 PASSED IN ASSTT. YEAR 2005-06. HE CON TENDED THAT ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE . LD. DR WAS UNABLE TO CONTROVERT THE CONTENTION OF THE LD. COUN SEL FOR THE ASSESSEE. 6. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT EXACTLY SIMILAR DISALLOWANCE WAS MADE IN ASSTT. YEAR 2005-06 AND TH OSE DISALLOWANCE HAVE BEEN DELETED BY THE LD. CIT(A). T HE TRIBUNAL HAS UPHELD THE DISALLOWANCE BY FOLLOWING ITS ORDER IN ASSTT. YEAR 2004-05. THE FINDING OF THE TRIBUNAL IN ASSTT. YEAR 2005-06 READ AS UNDER :- 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER: ITA NO. 4684/DEL/09 ASSTT. YEAR 2006-07 3 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION OF RS.535501/- AND RS.1101189/- MADE BY THE A.O. ON ACC OUNT OF BONUS AND COMMISSION PAID TO DIRECTORS OF THE COMPA NY EVEN THOUGH IT WAS NOT ALLOWABLE EXPENDITURE WITHIN THE MEANING OF SECTION 36(1)(II) OF THE INCOME-TAX ACT, 1961. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT TO AMEND, MODIFY, ALTER, ADD OR FORGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE DURING THE HEARING OF THIS APPEAL. 3. THE ONLY ISSUE FOR CONSIDERATION RELATES TO DELE TING THE ADDITION OF RS.5,35,501/- AND RS.11,01,189/- MADE B Y THE ASSESSING OFFICER ON ACCOUNT OF BONUS AND COMMISSIO N PAID TO DIRECTORS OF THE COMPANY. AT THE OUTSET, IT WAS POINTED OUT BY THE LD. A.R. OF THE ASSESSEE THAT THE ISSUE IS C OVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF I.T.A.T. FOR ASSESSMENT YEAR 2004-05 DATED 27/2/2009. IT HAS ALSO BEEN SUBM ITTED THAT LD. CIT(A) HAS DELETED THE ADDITION RELYING ON DECISION OF I.T.A.T. IN ASSESSEES OWN CASE. 4. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. I.T.A.T. DELHI BENCH B NEW DELHI IN ITA NO.5022/DEL/2007 FOR ASSESSMENT YEAR 2 004-05 IN ASSESSEES OWN CASE HAS DELETED THE ADDITION BY OBS ERVING AS UNDER: 4. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THERE IS NO DISPUTE THAT IN THE PRECEDING YEARS AND ALSO IN THE SUBSEQUENT YEARS OF THE ASSESSMENT YEAR UNDER APPEAL THE DEPARTMENT HAS ACCEPTED THE COMMISSION PAID BY THE ASSESSEE COMPANY TO ITS DIRE CTOR. WE ALSO FIND THAT THE BONUS WAS PAID @8.33% TO THE DIRECTOR OF T HE ASSESSEE COMPANY. WE ALSO FIND THAT DIRECTOR SRI D.K.OHRI WA S PAID SALARY TO THE EXTENT OF RS.60 LACS AND THE BONUS WAS PAID @8.33% I.E. RS.5 LACS, WHICH IS NOT AT ALL EXCESSIVE AND UNREASONABLE. THE REMAINING SUM OF RS.34,501/- WAS PERTAINED TO OTHER TWO DIRECTORS. I N VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.8,31,148/- AND RS.5,34,501/- ON ACCOUNT OF CO MMISSION AND BONUS RESPECTIVELY PAID TO DIRECTORS AND THE SAME I S HEREBY UPHELD. REVENUES APPEAL IS, THEREFORE, DISMISSED. 5. IN THE CASE BEFORE US, THE LD. CIT(A) HAS EXAMIN ED THE NATURE OF COMMISSION AND BONUS PAID TO THE DIRECTOR S. SINCE ITA NO. 4684/DEL/09 ASSTT. YEAR 2006-07 4 FACTS OF THE CASE ARE IDENTICAL TO THE FACTS FOR AS SESSMENT YEAR 2004-05, RESPECTFULLY FOLLOWING THE PRECEDENT, THE PAYMENT MADE BY THE ASSESSEE TO ITS DIRECTORS ON AC COUNT OF COMMISSION AND BONUS IS ALLOWABLE AS DEDUCTION. 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. 7. LD. CIT (A) HAS ALSO FOLLOWED THE ORDER OF THE ITAT IN ASSTT. YEAR 2004-05. IN VIEW OF THE ABOVE DISCUSSION WE DO NOT FIND ANY MERIT IN THIS APPEAL. IT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.2.2010 [R.C. SHARMA] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER VEENA DATED: COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR , ITAT