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The Tax Publishers Botil Oil Tools India Pvt. Ltd. v. Asstt. CIT [ITA Nos. 973/Del/2010, 2382/Del/2013, 3506/Del/2010 & 5375/Del/2013, dt. 10-5-2016] : 2016 TaxPub(DT) 2301 (Del-Trib) Payment of commission and ex gratia to directors whether hit by section 36(1)(ii) *Facts:* Assessee had paid commission and ex gratia to its directors as part of the contractual emoluments under section 198 of the Companies Act, 1956 read with schedule XII. This was disallowed by the assessing officer and upheld by the Commissioner (Appeals) that they were dividends in the guise of commission hit by section 36(1)(ii) which reads as under -- "36(1)(ii) any sum paid to an employee as bonus or commission for services rendered, where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commission;" On further appeal by the assessee: Held in favour of the assessee that the payment of commission to the directors is not hit by section 36(1)(ii) as it had risen out of contractual covenants.

The Tax Publishers

Botil Oil Tools India Pvt. Ltd. v. Asstt. CIT [ITA Nos. 973/Del/2010, 2382/Del/2013, 3506/Del/2010 & 5375/Del/2013, dt. 10-5-2016] : 2016 TaxPub(DT) 2301 (Del-Trib)

Payment of commission and ex gratia to directors whether hit by section 36(1)(ii)

Facts:

Assessee had paid commission and ex gratia to its directors as part of the contractual emoluments under section 198 of the Companies Act, 1956 read with schedule XII. This was disallowed by the assessing officer and upheld by the Commissioner (Appeals) that they were dividends in the guise of commission hit by section 36(1)(ii) which reads as under --

"36(1)(ii) any sum paid to an employee as bonus or commission for services rendered, where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commission;"

On further appeal by the assessee:

Held in favour of the assessee that the payment of commission to the directors is not hit by section 36(1)(ii) as it had risen out of contractual covenants.