I.  Today's News:   

1. IT-Cir. No. 3 - Supplementary Memorandum Explaining the Official Amendments Moved in the Finance Bill, 2012 As reflected in the Finance Act, 2012  (Click for detail)

2. Foreign remittances come under scanner  (Click for detail)

3. HC admits NBFC's plea against RBI  (Click for detail)

4. Govt. Can't Make Rules Contrary to the Act: SC  (Click for detail)

5. CSR a Must in Cos Bill  (Click for detail)

II.  Useful Case law:

1.   M/s G.B. Morrison Travels Vs. DCIT, ITA No. 1296/Del/2012, Assessment year: 2006-07, 2007-08 & 2008-09, Date: 01.06.2012, ITAT – Delhi

Issue: The bonus and commission paid to the Managing Director as services rendered as per terms of appointment as Executive/Managing Director of a company is allowable business expenditure.

Held: That A was the managing director and in terms of the board resolution was entitled to receive commission for services rendered to the company. It was a term of employment on the basis of which he had rendered service. Accordingly, he was entitled to the amount. Commission was treated as a part and parcel of salary and tax had been deducted at source. A was liable to pay tax on both the salary component and the commission. The payment of dividend was made in terms of the Companies Act, 1956. The dividend had to be paid to all shareholders equally. This position could not be disputed by the Revenue. Dividend was a return on investment and not salary or part thereof.” we hold that the amount of commission and bonus paid to the Managing Director was allowable business expenditure.

(Please click here for judgment)

2.  DCIT Vs. Shri Surendra Mohan, ITA No. 4552/Del/2011, Assessment year:2008-09, Date: 01.06.2012, ITAT -  Delhi

Held: No application of section 194H in respect of discount received on purchase of plots. In other words, the purchasers received discount in the purchase price. There is nothing to suggest that the purchasers of flats rendered any service to the assessee in order to attract application of section 194H.

There is nothing to suggest that the purchasers of flats rendered any service to the assessee rather the assessee rendered services to the intending purchasers. In the light of view taken by the Hon’ble Apex Court in their in Surendra Buildtech Pvt. Ltd, a co-ordinate Bench in their the decision dated 27th May, 2011 in the case of Surendra Buildtech Pvt. Ltd in I.T.A. no.4854/Del./2010 for the AY 2007-08 concluded as under:

6. The expression “commission or brokerage” has been explained in the explanation appended to this section. According to the meaning provided in the explanation, the commission would be considered, if any person received it directly or indirectly on behalf of another person for the services rendered, and such services should not be professional services. In the present case, admittedly the person to whom discount was granted by the assessee were not acting as an agent for the assessee, rather they are the purchaser of the property. They have not provided any type of services to the assessee. They have just booked the flat through the assessee. In fact, assessee is an agent between the builder and the ultimate purchaser of the flats. The assessee has parted with some part of the commission received from the builder from alluring the purchaser so that it can earn more commission. It is just providing a discount to the purchaser and not paying any commission for any services taken from such customers. It appears that learned Assessing Officer was influenced by the nomenclature of the receipt in the hands of the assessee. He failed to distinguish what character such receipt would attain when it will be offered to the customer. The relationship between the assessee and the purchaser of the flat is of buyer and seller. The learned First Appellate Authority has appreciated the controversy in right perspective and we do not see any person to interfere in his order.”

In the light of view taken by the Hon’ble Apex Court in their aforesaid decision in Surendra Buildtech Pvt. Ltd(supra) provisions of sec. 40a(ia) of the Act are not applicable.

(Please click here for judgment)

• J&K Minerals Limited
  Preparation of Books of Accts./Balance Sheet
  Srinagar
  (Click for detail)

• HPBOCW Welfare Board
  Preparation of Accounting Manual & Internal Audit System
  Shimla
  (Click for detail)

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