Taxability of Commission/Bonus to Employee: Madras High Court allows Deduction u/s 36(1)(ii) of the Income Tax Act

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Taxability of Commission/Bonus to Employee: Madras High Court allows Deduction u/s 36(1)(ii) of the Income Tax Act [Read Judgment]

Taxability of Commission - Bonus to Employee - Madras High Court - deduction - Income Tax Act - taxscan

The Madras High Court, while hearing an appeal regarding the taxability of commission/bonus paid to the employees under deduction under section 36(1)(ii) of the Income Tax Act, has allowed relief to the Company and deleted the addition.

The revenue has raised the issue whether the Tribunal was right in upholding the order of Commissioner of Income Tax (Appeals) in deleting the disallowance made by the Assessing Officer under Section 36(1)(ii) of the Income Tax Act.

The division bench consisting ofJustice M.Duraiswamy and Justice T.V. Thamilselvi relied on the decision in the case of the Commissioner of Income Tax, Chennai V/s M/s.True Value Homes (India) Pvt. Ltd.

The Court, relying on a catena of decisions where the Courts were of the opinion that  the Managing Director, in terms of the Board resolution is entitled to receive commission for services rendered to the company. It is a term of employment on the basis of which he had rendered service.

The court, based on the precedents allowed the plea of the assessee and observed that commission was treated as a part and parcel of salary and TDS has been deducted. The assessee was liable to pay tax on both the salary component and the commission.

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