C.D. INTEGRATED SERVICES LTD.,AHMEDABAD vs. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-3, AHMEDABAD

This appeal filed by the Assessee is directed against the order of the Ld. CIT(A)-10, Ahmedabad dated 24.04.2015 pertaining to A.Y. 2011-12. There is

A perusal of the Audited Profit & Loss Account of the 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 assessee company has paid commission of Rs.10,00,000/- to director Shri Parthiv Mahadevia. The assessee was therefore, requested to show cause vide order sheet entry dated 18/12/2013 to make its submission with regard to allowability of the same u/s 36(1)(ii).

The assessee vide letter dated 10/01/2013 has interalia, submitted as under-

The submission of the assessee company made in this regard has been perused & carefully considered. In this context, it is imperative to refer to the provisions of section 36(l)(ii) of the Income tax Act, 1961, which reads as under:

A bare reading of the above provision makes it abundantly clear that commission is payable only to the employees. Shri Parthiv Mahadevia is a Director of the company, also getting salary as remuneration which is evident from the explanation furnished by the assessee itself 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 commission to the employee. Hence, the contention of the assessee company is devoid 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. ;

Against the addition of Rs. 10,00,000/-, assessee preferred 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.

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 recovery notice was received by the assessee.

As we can see on merit in impugned order, ld. CIT(A) disallowed the claim of the assessee on the ground that Board resolution alongwith working of commission has not been provided by the assessee to the authorities. Therefore, the claim of the assessee is not acceptable. Today ld. A.R. shown us copy of the resolution alongwith detail working of the commission and certified that following were filed before the lower authorities and Also drawn our attention towards the order of the ld. CIT(A) for assessment year 2009-10 wherein ld. CIT(A) has granted relief to the assessee 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.

In the result, the appeal filed by the assessee is allowed.