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December 2013

Business expenditure: Bonus: Section 36(1) (ii): A. Ys. 2005-06 and 2006-07: Bonus paid to director as per Board resolution: Directors rendering valuable services to company: Bonus not related to shareholding: Bonus deductible:

By K. B. Bhujle, Advocate
Reading Time 1 mins
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CIT vs. Career Launcher India Ltd.; 358 ITR 179(Del):

For the A. Ys. 2005-06 and 2006-07, the Assessing Officer disallowed the claim for deduction of the bonus paid to the directors on the ground that it would have been payable to the directors as dividend had it not been paid as bonus. The Tribunal allowed the assessee’s claim and deleted the addition. On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under:

“i) It was not disputed regarding bonus (a) that payment was supported by board resolutions, and (b) that none of the directors would have received a lesser amount of dividend than the bonus paid to them, having regard to their shareholding.

ii) Further, the directors were full-time employees of the company receiving salary. They were all graduates from IIM, Bangalore. Taking all these facts into consideration, the bonus was a reward for their work, in addition to the salary paid to them and was in no way related to their shareholding. It was deductible u/s. 36(1)(ii).”

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