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SRC Aviation Pvt. Ltd. vs Assisstant Commissioner Of Income Tax - (High Court of Delhi) (13 Apr 2022)

Payment of bonus or commission is not allowable as deduction under Section 36 (1) (ii) of the IT Act


Direct Taxation

The Appellant is a private limited company. Sh. Arvind Chadha and Sh. Anoop Chadha are two share-holders and directors holding 50% equity shares each since inception of the company. In the Assessment year 2011-2012, the company has paid bonus of Rs.1 crore each to both the directors. Similarly in the assessment year 2014-2015 the company has paid bonus of Rs.1.5 crore each to both the Directors. Assessing Officer disallowed the same relying upon Section 36 (1)(ii) of the Income Tax Act, 1961 (IT Act). The Assessing Officer was of the view that bonus was paid to avoid payment of dividend distribution tax.

The Commissioner of Income Tax (appeal) in the appeal filed by the Assessee vide orders confirmed the disallowance and took a view that had the impugned bonus not been paid to these two directors, the amount would have been paid to them as dividend. The order of the CIT (A) was challenged before the ITAT. The Tribunal also agreed with the Assessing Officer and CIT (A) and upheld the order of assessing officer and CIT(A). Aggrieved by the order of the ITAT, the appellants have challenged the order before this Court.

The scope of jurisdiction in Section 260A of IT Act is very well settled. It is a settled proposition that ITAT is the final arbiter of the facts. High Court can interfere in the order of the ITAT only if there is substantial question of law or there is manifest illegality or it suffers from perversity.

There is no substantial question of law in the present cases. The assessing officer and CIT (A) have given a concurrent finding that the assessee has paid the bonus in lieu of the dividend and therefore, the above sum is disallowed under Section 36 (1) (ii) of IT Act. The ITAT also after considering the findings of the assessing officer and the CIT (A) had held that, the payment of bonus or commission is not allowable as deduction under Section 36 (1) (ii) of the IT Act in the hands of the assessing company. In the absence of any substantial question of law, the appeals are liable to be dismissed. Appeals dismissed.


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