Madras High Court
Commissioner Of Income Tax vs R. Lakshmi Narayanan on 20 December, 2005
Equivalent citations: (2006)202CTR(MAD)125
Author: K. Raviraja Pandian
Bench: K. Raviraja Pandian, P.P.S. Janarthana Raja
JUDGMENT K. Raviraja Pandian, J.
1. This appeal has been filed by the Revenue by formulating the following substantial questions of law :
(i) Whether, in the facts and circumstances of the case, the Tribunal was right in holding that the commission of Rs. 3,94,405 earned during the assessment year is not assessable to tax in this assessment year ? and
(ii) Whether, in the facts and circumstances of the case, the commission that became due to the assessee takes the character of salary for the purpose of application of Sub-section15 and 17 of the Act to assess the commission during this asst. yr. 1996-97 ?
2. The statement of facts proceeds as follows :
The assessee is the chairman and managing director of M/s Hi Tech Arai Ltd. As per the board meeting dt. 30th June, 1995, the assessee was entitled to the commission for a fixed percentage of the profits. The AO found that the commission was earned during the asst. yr. 1996-97 and therefore, brought it to tax for the said assessment year. On appeal by the assessee, the CIT(A) found that the profit was finalised and approved only in the following year relevant to the asst. yr. 1997-98 and allowed the appeal filed by the assessee by finding that the amount was so taxable only during the asst. yr. 1997-98. On appeal by the Revenue, the Tribunal also confirmed the view arrived by the CIT(A).
3. Before us, it is contended that the commission approved to the assessee is for the asst. yr. 1996-97 and on the closure of the accounting year, the assessee would be entitled for such commission. In the stated circumstances, the Tribunal has erred in law in confirming the order of the CIT(A), who found that the income is taxable for the asst. yr. 1997-98.
4. We have heard the argument of the learned Counsel and perused the materials on record.
5. As seen from the order of the Tribunal, the commission as earned by the assessee has been approved in the board meeting, which is relevant to the asst. yr. 1997-98. It is further clear that the TDS has also been deducted only for the asst. yr. 1997-98 and not for the assessment year prior to that. This Court, in a comparable set of facts, in the case of CIT v. Seshasayee Bros. (P) Ltd. (1999) 151 CTR (Mad) 598 had taken the view that the income is taxable in the assessment year in which the same has been approved by the board. As a matter of fact, the said decision has also been taken aid by both the CIT(A) and Tribunal. Hence, we are of the view that the appeal requires no entertainment, as the issue follows the Division Bench judgment of this Court.
6. Accordingly, the tax case (appeal) is dismissed. The issue is decided in favour of the assessee and against the Revenue.