The AO held that the assessee had paid commission expenses in excess of the market rates and disallowed the amount under S.\u00a036(1)(ii). \u00a0He considered that an amount as excessive and made addition under the provisions of S.\u00a040A(2)(b). \u00a0For the assessment year 2010-11 he held that the assessee had tried to evade dividend distribution tax under S. \u00a0115-O\u00a0by giving commission which was far more excessive. \u00a0On appeal the Tribunal held that\u00a0 the assessee was not bound by section\u00a0198\u00a0and section\u00a0309\u00a0of the\u00a0Companies Act, 1956\u00a0as the assessee was neither a public company nor a private company which was the subsidiary of a public company nor received any payment beyond the provisions of sub-section (1)(a) of section\u00a0309. \u00a0In terms of the Board resolution a maximum commission of 27 per cent. \u00a0over the turnover can be paid to the directors whereas the total payments was only 1. 25 per cent. \u00a0of the value of the export orders achieved by them. \u00a0The AO had not brought anything on record nor gathered any evidence about the contribution of the directors which went contra to the payments they received. \u00a0There was no doubt about the qualifications and contribution of the directors for obtaining the orders and increasing the turnover. \u00a0The payment of commission had been the practice of the company for the past seven years. The directors who had been receiving commission paid tax at the maximum marginal rate and no revenue leakage could also be found based on the tax payments. Increase in personal expenses and comparing it with the increase in directors remuneration could not be accepted as a methodology to calculate the reasonable remuneration. \u00a0The company could determine the rates of salary, remuneration, commission as long as it did not infract any law in force. \u00a0Hence the addition made by the AO was deleted. \u00a0\u00a0(AY. \u00a02006-07 2009-10, 2010-11, 2011-12).<\/p>\n","protected":false},"excerpt":{"rendered":"
S. 40A(2) : Expenses or payments not deductible\u2013Excessive or unreasonable-Contribution and commission of directors-Directors are paying tax at maximum marginal rate \u2013 No disallowances can be made. [S. 36(1)(ii), 37(1), 40A(2)(b), 115-O, Companies Act, 1956, S. 198, 309]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[1],"tags":[],"class_list":["post-8579","post","type-post","status-publish","format-standard","hentry","category-digest"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-2en","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/8579","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=8579"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/8579\/revisions"}],"predecessor-version":[{"id":8580,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/8579\/revisions\/8580"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=8579"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=8579"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=8579"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}