PRAKASH CHEMICALS INTERNATIONAL PRIVATE LIMITED,VADODARA vs. ACIT,CENTRAL CIRCLE-3(PREVIOUSLY CIRCLE-2(1)(2)), VADODARA

ITA 2495/AHD/2025Status: DisposedITAT Ahmedabad24 September 2026AY 2016-177 pages
AI SummaryAllowed

What were the facts?

The assessee company paid a commission of Rs. 96,98,425/- to its Managing Director. The Assessing Officer (AO) disallowed this commission, holding it was paid in lieu of dividend and not eligible for deduction under Section 36(1)(ii) of the Income Tax Act.

What did the Tribunal hold?

The Tribunal held that the commission was paid for services rendered by the Managing Director, was approved by the Board, and was linked to performance. It was also noted that dividend was separately declared and the director paid tax on the commission.

What were the issues?

Whether the commission paid to the Managing Director for services rendered is an allowable business expenditure or is to be treated as dividend distribution.

Which sections of the Income-tax Act were involved?

Section 36(1)(ii)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD

Before: SHRI SANJAY GARG & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri S N Soparkar, Sr. Advocate & Ms. Ukti Shah, AR
For Respondent: Shri Hrishikesh Hemant Patki, SR-DR
Hearing: 28.07.2026Pronounced: 24.09.2026

PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:

This appeal is filed by the Assessee against the order of Commissioner of Income Tax (Appeals) -12, Ahmedabad [hereinafter referred to as “CIT(A)”] dated 16.10.2025 for the Assessment Year (A.Y.) 2016-17 in the proceeding u/s 143(3) of the Income Tax Act [hereinafter referred as “The Act”].

2.

The brief facts of the case are that the assessee had filed its return of income for A.Y. 2016-17 on 09.11.2016 declaring total income of Rs.9,33,77,620/-. The case was selected for complete scrutiny under Prakash Chemicals International Pvt Lt

The order continues below.

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