A.C.I.T Cir - 36,kolkata., Kolkata V. Sri Sandip Somany., Kolkata

ITA 95/KOL/2013

• Counselvise Citation: 9523514 RSA 2013
• Duration Of Justice: 2 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 16-01-2013
• Court: TRIBUNAL
• Department Lawyers: DEBASISH BANERJEE JCITLD
• Keywords: Salary income; Assessment record
• Section: 143(3)

Judgement Text

ITA NO.95/KOL/2013-A-AM SRI SANDIP SOMAN Y 1 IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, K OLKATA BEFORE : SHRI N.V. VASUDEVAN, JUDICIAL MEMBER, A ND SHRI M. BALAGANESH, ACCOUNTANT MEMBER I.T.A NO. 95/KOL/ 2013 A.Y : 2004-05 ASSISTANT COMMISSIONER OF INCOME TAX VS. SRI SANDIP SOMANY CIRCLE-36, KOLKATA PAN: AIYPS 6270N (APPELLANT) (RESPON DENT) FOR THE APPELLANT/ DEPARTMENT : SHRI DEBASISH BANERJEE, JCIT, LD.SR.DR FOR THE RESPONDENT/ASSESSEE: NONE APPE ARED DATE OF HEARING: 14-10-2015 DATE OF PRONOUNCEMENT: 27 -10-20 15 ORDER SHRI M.BALAGANESH, AM THIS APPEAL OF THE REVENUE ARISES OUT OF THE ORDER OF THE LEARNED CITA IN APPEAL NO.212/CIT(A)-XX/CIR-36/2011-12/KOL DATED 0 4-10-2012 FOR THE ASST YEAR 2004-05 PASSED AGAINST THE ORDER OF ASSESSMENT FRAM ED BY THE LEARNED AO U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS THE ACT). 2. SHRI.DEBASHISH BANERJEE, JCIT, THE LEARNED DR A RGUED ON BEHALF OF THE REVENUE AND NONE APPEARED ON BEHALF OF THE ASSESSEE . 3. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS WHETHER AN ADDITION COULD BE MADE TOWARDS COMMISSION PAID TO DIRECTORS PURSUANT TO THE TERMS OF EMPLOYMENT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSES SEE IS A JOINT MANAGING DIRECTOR OF A COMPANY NAMED M/S HINDUSTAN SANITARY WARE AND INDUS TRIES LTD AND DRAWING SALARY ITA NO.95/KOL/2013-A-AM SRI SANDIP SOMAN Y 2 AND COMMISSION. THE ASSESSEE WAS IN RECEIPT OF SA LARY INCOME AND HAD OFFERED SALARY INCOME IN THE FOLLOWING MANNER IN THE RETURN OF INC OME :- SALARY 25,92,000 DIRECTORS COMMISSION 7,45,091 -------------- 33,37,091 VALUE OF PERQUISITES 1,11,025 34,48,116 4.1 IN THE NOTES ON ACCOUNTS TO THE FINANCIAL STATE MENTS OF THE AFORESAID COMPANY, IN SERIAL NUMBER 19, THE COMPUTATION OF COMMISSION PAY ABLE TO JOINT MANAGING DIRECTOR AS A PERCENTAGE OF NET PROFITS WAS REFLECTED. THIS COMMISSION IS PAYABLE TO THE JOINT MANAGING DIRECTOR (ASSESSEE HEREIN) BASED ON THE PR OFITS DERIVED BY THE SAID COMPANY FOR THE YEAR ENDED 31.3.2004 AND THE SAME WILL BE P AID IN FINANCIAL YEAR 2004-05 RELEVANT TO ASST YEAR 2005-06 SUBJECT TO APPROVAL O F THE SAID PAYMENT IN THE ANNUAL GENERAL MEETING BY THE SHAREHOLDERS OF THE COMPANY IN ACCORDANCE WITH THE PROVISIONS OF THE COMPANIES ACT, 1956. THE LEARNED AO SOUGH T TO MAKE AN ADDITION OF RS. 75,82,091/- BEING THE COMMISSION DUE TO THE ASSESSE E BASED ON THE NET PROFITS FOR THE YEAR ENDED 31.3.2004 AND BROUGHT TO TAX IN ASST YEA R 2004-05 ITSELF AS SALARY IS TO BE TAXED ON DUE OR RECEIPT BASIS WHICHEVER IS EARLIER AND SALARY INCLUDES COMMISSION. THIS WAS DELETED BY THE LEARNED CITA BY RELYING UPO N THE DECISION RENDERED BY THIS TRIBUNAL IN THE HANDS OF THE MANAGING DIRECTOR OF T HE AFORESAID COMPANY SHRI.RAJENDRA KR. SOMANI AND THE DECISION OF HONBLE CALCUTTA HIG H COURT IN THE CASE OF SANJIB KUMAR AGARWAL VS CIT REPORTED IN 310 ITR 295 (CAL) WHEREIN IT WAS HELD THAT THE COMMISSION PAYABLE TO THE DIRECTORS DETERMINED BASE D ON NET PROFITS OF THE COMPANY WHICH GETS APPROVED IN THE SUBSEQUENT ASSESSMENT YE AR WOULD BE TAXABLE IN THE YEAR IN WHICH THE PROFITS OF THE COMPANY WERE FINALIZED AND NOT IN THE YEAR TO WHICH THE PROFITS OF THE COMPANY BELONGED. AGGRIEVED, THE RE VENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS :- 1. ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE L D. CIT(A)-XX, KOLKATA HAS ERRED IN DELETING THE ADDITION OF RS.70 ,72,237/- WHEREAS ITA NO.95/KOL/2013-A-AM SRI SANDIP SOMAN Y 3 FROM THE TAX AUDIT REPORT (ANNEXURE 5) ENCLOSED WIT H THE ASSESSMENT RECORDS OF THE COMPANY FOR THE FINANCIAL YEAR 2003- 04 THAT AN AMOUNT OF RS.1,07,20,368/- WAS PAID TO THE ASSESSEE, MR. S ANDIP SOMANY, JOINT MD OF THE COMPANY TOWARDS DIRECTORS REMUNERATION I NCLUDING SALARY, PF & COMMISSION AND WAS FURTHER NOTICED FROM THE NO TES ON ACCOUNTS SERIAL NO.19 THAT COMMISSION PAYABLE TO THE CHAIRMA N & MANAGING DIRECTOR FOR THE YEAR ENDED 31.03.2004 WAS RS.75,8 2,091/-. AS PER SECTION 15(A) OF THE INCOME TAX ACT, ANY S ALARY DUE FROM AN EMPLOYER WHETHER PAID OR NOT IS CHARGEABL E TO TAX UNDER THE HEAD SALARIESAND AS PER SECTION 17(1)(IV) OF THE ACT IBID SALARY INCLUDES COMMISSIONS. IN THIS CASE THE DIRECTORS C OMMISSION HAS BEEN PROVIDED IN THE BOOKS OF COMPANY IN THE F.Y 2003-04 RELEVANT TO THE A.Y 2004-05. 2. THE APPELLANT CRAVES LEAVE TO ADDUCE ADDITION A ND/OR SUPPLEMENTARY GROUND/GROUNDS AND TO AMEND AND/OR AL TER THE GROUND/GROUNDS ANY TIME BEFORE OR THE OF HEARING O F THE APPEAL. 5. THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED AO. 6. WE HAVE HEARD THE LEARNED DR AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE BEING A JOINT MANAGING DI RECTOR OF M/S HINDUSTAN SANITARY WARE AND INDUSTRIES LTD WAS IN RECEIPT OF COMMISSIO N BASED ON NET PROFITS OF THE COMPANY DETERMINED AND FINALIZED IN THE SUBSEQUENT YEAR ON A CONSISTENT BASIS AND HAS BEEN OFFERING THE SAME AS HIS INCOME FROM SALAR Y IN THE YEAR IN WHICH THE PROFITS OF THE COMPANY HAVE BEEN FINALIZED AND APPROVED BY THE SHAREHOLDERS IN THE ANNUAL GENERAL MEETING OF THE COMPANY IN ACCORDANCE WITH T HE PROVISIONS OF COMPANIES ACT, 1956. DURING THE ASSESSMENT YEAR 2004-05, THE ASSE SSEE HAS DULY OFFERED THE COMMISSION INCOME WORKED OUT IN THE MANNER STATED S UPRA AMOUNTING TO RS. 7,45,091/- . THIS IS ADMITTEDLY THE COMMISSION ENT ITLEMENT OF THE ASSESSEE AS A PERCENTAGE OF NET PROFITS FOR THE YEAR ENDED 31.3.2 003 (ASST YEAR 2003-04) AND THE PROFITS FOR WHICH HAVE BEEN FINALIZED BY THE COMPAN Y DURING FINANCIAL YEAR 2004-05 RELEVANT TO ASST YEAR 2004-05. ACCORDINGLY, THE A SSESSEE HAS OFFERED THE SAME AS SALARY INCOME IN ASST YEAR 2004-05 AND THIS PRACTIC E HAS BEEN FOLLOWED BY THE COMPANY YEAR ON YEAR ON A CONSISTENT BASIS AND ACCE PTED BY THE REVENUE. ITA NO.95/KOL/2013-A-AM SRI SANDIP SOMAN Y 4 6.1 THE DISPUTED ISSUE BEFORE US IS WITH REGARD TO THE COMMISSION PAYABLE TO THE ASSESSEE AMOUNTING TO RS. 75,82,091/- BASED ON THE PROFITS DERIVED BY THE SAID COMPANY FOR THE YEAR ENDED 31.3.2004 AND THE SAME B EING PAID IN FINANCIAL YEAR 2004- 05 RELEVANT TO ASST YEAR 2005-06 SUBJECT TO APPROVA L OF THE SAID PAYMENT IN THE ANNUAL GENERAL MEETING BY THE SHAREHOLDERS OF THE COMPANY IN ACCORDANCE WITH THE PROVISIONS OF THE COMPANIES ACT, 1956. WE ALSO FIND THAT TH E ASSESSEE HAD DULY OFFERED IN ASST YEAR 2005-06 THE COMMISSION INCOME OF RS. 75,82,091 /- BASED ON THE PROFITS OF THE COMPANY FOR THE YEAR ENDED 31.3.2004 WHICH GOT FINA LIZED IN FINANCIAL YEAR 2004-05 RELEVANT TO ASST YEAR 2005-06. WE FIND THAT THIS IS SQUARELY COVERED BY THE DECISION OF CALCUTTA HIGH COURT IN THE CASE OF SANJIB KUMAR AGARWAL VS CIT REPORTED IN (2009) 310 ITR 295 (CAL) WHEREIN IT WAS HELD AS BELOW:- IT MAY BE PERTINENT TO MENTION HERE THAT SIMILAR ISSUE HAS BEEN RECENTLY DECIDED BY HONBLE CALCUTTA HIGH COURT IN THE CASE OF SANJIB KUMAR AGARWAL VS. CIT(2009) 310 ITR 295(CAL). IN TH IS CASE ALSO THE APPELLANT WAS A FULL TIME DIRECTOR OF A COMPANY. A S PER THE CONDITIONS OF SERVICE, THE APPELLANT WAS TO RECEIVED COMMISSIO N AT THE RATE OF ONE PERCENT ON THE NET PROFIT OF THE COMPANY APART FRO M THE MONTHLY SALARY AND CERTAIN PERQUISITES, WHICH WERE ALLOWED TO HIM. THE ASSESSING OFFICER HELD THAT A SUM OF RS.1,02,464/- RELATING T O THE PERIOD JULY 1, 1998 TO MARCH 31, 1989, ACCRUED AS INCOME TO THE AS SESSEE AND WAS LIABLE TO BE TAXED FOR THE ASSESSMENT YEAR 1989-90. HONBLE HIGH COURT HELD THAT THE COMMISSION WAS TAXABLE IN THE YEAR I N WHICH THE PROFITS OF THE COMPANY WERE FINALIZED AND NOT IN THE YEAR TO WHICH THE PROFITS OF THE COMPANY BELONGED. THE FACTS OF THE CASE OF THE ASSESSEE ARE SIMILAR TO THE FACTS OF THIS CASE. THEREFORE, THE COMMISSIO N OF RS.75,82,091/- SHALL BE TAXABLE IN A.Y 2005-06 AND NOT IN A.Y 2004 -05. AFTER HEARING THE RIVAL SUBMISSIONS, ON CAREFUL P ERUSAL OF THE MATERIAL AVAILABLE ON RECORD AND KEEPING IN VIEW OF THE FACT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS AL LOWED THE APPEAL OF THE ASSESSEE RESPECTFULLY FOLLOWING THE JURISDIC TIONAL DECISION OF THE HONBLE HIGH COURT IN THE CASE OF SANJIB KUMAR AGAR WAL VS. CIT (2009) 310 ITR 295 ((CAL). WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS). THERE FORE, WE CONFIRM THE SAME GROUND RAISED BY THE REVENUE IS DISMISSED. ITA NO.95/KOL/2013-A-AM SRI SANDIP SOMAN Y 5 RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDIC TIONAL HIGH COURT STATED SUPRA, WE ARE NOT INCLINED TO INTERFERE WITH THE FI NDINGS OF THE LEARNED CITA ON THIS GROUND. ACCORDINGLY, THE GROUNDS RAISED BY THE REV ENUE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 27 / 10 /2015 COPY OF THE ORDER FORWARDED TO: 1.. THE APPELLANT: ASSTT. COMMISSIONER OF INCOME T AX, CIR-36, AAYKAR BHAWAN POORVA, 8 TH FL., 110 SHANTIPALLY, KOL-107. 2 THE RESPONDENT- SRI SANDIP SOMANY 2 RED CROSS PL ., KOL-1. 3 4.. /THE CIT, / THE CIT(A) 5. DR, KOLKATA BENCH 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT REGISTRAR SD/- ( N.V. VASUDEVAN, JUDICIAL MEMBER ) SD/- (M. BALAGANESH, ACCOUNTANT MEMBER) DATE 27 /10/2015