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09-04-2019, Abaxial Architects, Section 37(1)(ii), 115-O, Tribunal Delhi

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1 week 3 days ago #9089 by amit
Section - 37(1)(ii), 115-O, 36(1)(ii), 6, 272A
Order Date - 09-04-2019
Favouring - Assessee Partly
Court - Tribunal Delhi
Appellant - Abaxial Architects P. Ltd.
Respondent - ACIT
Justice - R.K. PANDA AM & KULDIP SINGH JM
Citation - 419Taxpundit124
Appeal No. - ITA No.1233/Del./2016
Asstt. Year - 2012-13

Order

PER : KULDIP SINGH

The Appellant, M/s. Abaxial Architects P. Ltd. (hereinafter referred to as the ‘assessee’) by filing the present appeal sought to set aside the impugned order dated 06.01.2016 passed by the Commissioner of Income-tax (Appeals)-I, New Delhi, qua the assessment year 2012-13 on the grounds inter alia that :-

“1. That the Ld. CIT (Appeal)" has erred in law and on facts in sustaining the addition of Rs.12,00,000/- representing the bonus paid to the director employee.

2. That the Ld. CIT (Appeal) has erred in law and on facts in sustaining the addition of Rs.25,00,000/- by disallowing the legal and professional expenses.

3. That the Ld. CIT (Appeal) has erred in law and on facts in sustaining the addition despite no proper opportunity of being heard was provided by the AO.

4. That the impugned appellate order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence.”

2. Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessing Officer made addition of Rs.12,00,000/- being the bonus paid to Ms Suparna Bhalla, one of the Directors under section 37(1)(ii) of the Income-tax Act, 1961 (for short ‘the Act’) on the ground that Ms. Suparna Bhalla is also holding 50% shares in the assessee company and is entitled for salary of Rs.6,00,000/- and by virtue of her shareholding was entitled to receive the said amount of services rendered in the form of shares n profit as dividend. AO also made addition of Rs.25,00,000/- claimed to have been paid to M/s. Rockhard Infrastructure Pvt. Ltd. on account of legal and professional charges on failure of the assessee to prove the genuineness of such expenditure.

3. Assessee carried the matter by way of an appeal before the ld. CIT (A) who has confirmed the additions by dismissing the appeal. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.

4. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.

GROUND NO.1

5. The ld. AR for the assessee challenging the impugned addition u/s 115-O of the Act inserted w.e.f 01.06.1997 contended inter alia that every company is liable to pay the tax @ 15% on account of dividend distributed by it to its shareholders under subsection (2) of section 115 O; that this tax is applicable even if the domestic company has no income and that section 115-O is nonobstante provision which overrides the general provisions of section 36(1)(ii) of the Act; and relied upon the decision rendered by the Hon’ble Delhi High Court in the case of Chrys Capital vs. DCIT 376 ITR 183 (Delhi) and the coordinate Bench of the Tribunal in New Silk Route vs. DCIT – 43 CCH 372 (Mum.).

6. Ld. AR for the assessee further contended inter alia that the assessee had not paid bonus out of dividend or profit; that Ms. Suparna Bhalla, Director has paid the tax on the bonus @ 30% i.e. highest rate of tax whereas the company has to pay the tax @ 15% and as such, there is no loss to the Revenue; that bonus has been given to Ms. Suparna Bhalla for her hard work for the assessee company.

7. However, on the other hand, ld. DR for the Revenue relied upon the decision rendered by the AO as well as ld. CIT (A) and contended inter alia that the bonus paid to Ms. Suparna Bhalla is double the salary and is not supported with any agreement or Board’s resolution; that there is no link between bonus paid and services rendered; and that there is no evidence if any specific services have been rendered by Ms. Suparna Bhalla and relied upon the decision of Special Bench of the ITAT in M/s. Dalal & Broacha Stock Broking (P) Ltd. – (2011) 131 ITD 36 and coordinate Bench of the Tribunal in Travelmatics (P) Ltd. vs. DCIT in ITA No.549/Chd/2010 dated 09.12.2014.

8. Undisputedly, Ms. Suparna Bhalla has also been paid salary of Rs.6,00,000/- during the year under assessment who is holding 50% shares in the assessee company and is also entitled to receive profit or dividend. It is also not in dispute that as per provisions contained u/s 36(1)(ii), the commission and bonus paid to employees is allowable expenditure for the services rendered but this provision does not apply in case of person who is entitled to received the profit or dividend from the employer.

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