A division bench of the Delhi High Court, on Wednesday dismissed an appeal filed by the assessee and held that the payment of bonus or commission is not allowable as a deduction under Section 36 (1) (ii) of the Income Tax Act, 1961.
The appellant company, SRC Aviation Private Ltd, had been paying bonuses to the above working directors apart from the directors’ remuneration and claimed deduction towards the same. The department disallowed the claim by observing that such an amount does not cover the definition of ‘business expenditure’ under section 36.
The appellant contended before the High Court that the directors declared the bonus as part of the ‘salary’ under Section 15 of the Act in their returns of income and the same was accepted and assessed as such in their assessments. The directors paid the taxes on their respective incomes at the highest tax rate.
Upholding the original order, Justice Manmohan and Justice Dinesh Kumar Sharma observed that the question of law is very well settled.
“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 the Act. The ITAT also after considering the findings of the assessing officer and the CIT (A) had inter alia held that the payment of bonus or commission is not allowable as a deduction under Section 36 (1) (ii) of the Act in the hands of the assessing company. In the absence of any substantial question of law, the appeals are liable to be dismissed.”
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