Commission to Director based on % of Profit is allowable in year of Profit Determination

D.C.I.T. Vs. M/s. Associated Pigments Ltd. (ITAT Kolkata)

Commission to Director based on % of Profit is allowable in the year of Profit Determination

The Ld. Counsel contended that the commission was payable by the assessee company to its Managing Director @ 1% of the profits of the concerned financial year. He has contended that since the profit of the financial year 2009-10 was determined only in the financial year 2010-11 after finalizing the account, the allow ability on account of commission was crystallized only in the financial year 2010-11 relevant to assessment year 2011-12. We find merit in this contention of the ld. Counsel for the Assessee. Since, the commission to the Managing Director was payable by the assessee company on the profits and the profits for the financial year 2009-10 was determined only in the year under consideration after finalizing the account. The allow ability on account of commission was crystallized in the year under consideration and the Ld. CIT(A) in our opinion was fully justified in allowing the same. We do not find any infirmity in the order of Ld. CIT(A) on the issue and upholding the same. We dismiss the ground no.1 of the Revenue appeal.

TDS Provisions not applicable to Foreign Shipping Companies in view of CBDT Circular No. 723 dated 19.09.1995

Provisions of section 172 are applicable in the case of Foreign Shipping Companies notwithstanding anything contained in the other provisions of the Act and therefore, the provision of Section 194C and 195 relating to tax deduction at source are not applicable in such cases. As further clarified by the CBDT, where payments are made to shipping agents of non-resident shipping owners for carriage of passengers etc. shipped at a port in India, the agents step into the shoes of the principal and accordingly the provision of section 172 shall apply and not the provisions of Section 194 and 195. The issue in the present case relating to the dis allowance u/s 40(a)(ia) thus is squarely covered by the CBDT Circular No. 723 dated 19.09.1995 and even the Ld. DR has not been able to dispute this position. We therefore, find no infirmity in the impugned order of the Ld. CIT(A) deleting the dis allowance made by the AO u/s 40(a)(ia) by relying on the said circular issued by the CBDT and upholding the same, we dismiss the ground no. 2 of the Revenue appeal.

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