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Section 36(1)(ii) of the Income-tax Act, 1961 - Bonus or commission - Assessment year 2005-06 - Commission paid to managing director for service rendered by him as per terms of appointment is allowable as deduction under section 36(1)(ii) [In favour of assessee] The assessee-company paid certain sum as commission to its managing directors 'A' and 'H'. The Assessing Officer disallowed the payment on ground that same was in violation of section 36(1)(ii). The Tribunal upheld order of Assessing Officer taking into account fact that said directors were also shareholders of assessee and despite having earned reasonable net profit the assessee had not paid any dividend. 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 said amount. Commission was treated as a part and parcel of salary and TDS had been deducted. 'A' was liable to pay tax on both the salary component and the commission. Payment of dividend is made in terms of the Companies Act, 1956. Dividend has to be paid to all shareholders equally. This position could not be disputed by the revenue. Dividend is a return on investment and not salary or part thereof. Herein the consideration in the form of commission which was paid to 'A' was for services rendered by him as per terms of appointment as a managing director. Accordingly, the assessee was entitled for deduction. CASES REFERRED TO Loyal Motor Service Company Limited v. CIT [1946] 14 ITR 647 (Bom.) Vikas Jain and Salil Kapoor for the Appellant. Abhishek Maratha for the Respondent. JUDMENT 1. M/s. AMD Metplast Private Limited has filed the present appeal under section 260A of the Income-tax Act, 1961 (Act, for short) impugning the order dated August 31, 2010, passed by the Income-tax Appellate Tribunal ("the Tribunal", for short). The appeal pertains to the assessment year 2005-06. 2. After hearing learned counsel for the parties, the following substantial question of law is framed: "Whether the Tribunal is right in holding that commission of…

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