S. 36(1)(ii) Without Evidence AO can not presume Commission paid as Dividend

In the case of ACIT Vs. Bony Polymers Pvt. Ltd. (supra), it was held by the Co-ordinate Bench that in the absence of any material or evidence to show that the commission is being paid as dividend to the shareholders the dis allowance u/s 36 (1)(ii) was not permissible. The Companies Act, 1956 contains the limitation and restrictions in the matter of payment of dividend and such obligation of the company either to pay or not to pay dividend cannot be assumed. The Assessing Officer cannot presume that had this commission not paid would have necessarily being paid as dividend to the shareholders.

Thus, it was held that there was no basis for assumption particularly in the circumstances when the assessee company was having substantial profits out of which dividends also could be declared if so wanted by the assessee company. In this manner, the amount added by the Assessing Officer was deleted. The ratio of the said decision is fully applicable to the facts of the present case and we find no infirmity in the order of the CIT (A) vide which the relief has been granted to the assessee. Therefore, we decline to interfere and this ground of the revenue is dismissed.

INCOME TAX APPELLATE TRIBUNAL , NEW DELHI

ITA No. 710/Del/2012 -Assessment Year: 2008- 09

ACIT Vs. Coromandel Agrico Pvt. Ltd.

ORDER