IN THE HIGH COURT OF DELHI AT NEW DELHI 
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   ITA 1283/2011  
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 CIT              ..... Appellant 
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 Through Mr. Deepak Chopra,       Sr. Standing Counsel. 
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 versus 
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 CREATIVE TRAVEL PVT LTD       ..... Respondent 
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 Through 
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 CORAM: 
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 HON'BLE MR. JUSTICE SANJIV KHANNA 
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 HON'BLE MR. JUSTICE R.V.EASWAR 
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 O R D E R 
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              15.12.2011 
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 The present appeal filed by the Revenue under Section 260A of the 
 Income Tax Act, 1961 (Act, for short) relates to the assessment year 
 2006-07 and impugns the order dated 30th May, 2011 passed by the Income 
 Tax Appellate Tribunal (for short, the tribunal) in the case of Creative 
 Travel Pvt. Ltd. 
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 2. The Assessing Officer disallowed Rs.77,37,965/- paid as commission 
 and bonus to the directors on the ground that there was non-compliance 
 and violation of the provisions of Section 36(1)(ii) of the Act. It was 
 held that in the instant case the respondent company was avoiding payment 
 of dividend distribution tax @ 13.5% under Section 115O of the Act. 
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 3.  The aforesaid addition was affirmed by the Commissioner of Income 
 Tax (Appeals), but which as noticed above, has been deleted by the 
 tribunal. 
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 4. During the period relevant to the assessment year, the respondent 
 declared income of Rs.1,85,42,920/- in the return filed on 27th November, 
 2006. The respondent company had earned profit of Rs.1,98,98,286/-. 
 Dividend of Rs.20,00,000/- was proposed and was distributed/paid to the 
 shareholders. The total paid-up capital of the company was Rs.20,00,000/- 
 and, therefore, 100% dividend was declared. The Managing Director and the 
 two Directors of the respondent company were paid bonus and commission of 
 Rs.77,37,965/-. The aforesaid amount as per the provisions of the Act was 
 treated as salary paid and TDS was deducted. As per the findings recorded 
 by the tribunal, the said Directors have paid tax in the highest tax 
 bracket. The tribunal has rightly noticed that dividend has to be paid to 
 all shareholders equally as per the provisions of the Companies Act, 
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 1956. The said position cannot be disputed by the Revenue. The respondent company is a closely held company and it is accepted that all 
 shareholders are not directors in the respondent company. It may be also 
 noted that the directors in question, were working directors and had 
 contributed to the earnings/profit earned by the company respondent. A 
 non-working director or a mere shareholder does not contribute and put in 
 efforts or labour towards earning of profits. A shareholder merely makes 
 an investment and contributes to the share capital. It is not the number 
 of shareholders, but the principle which matters. 
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 5. The tribunal has further recorded that the respondent company has 
 been paying commission/bonus to the directors for last 30 years. It is 
 submitted by the Revenue that with regard to the assessment years 2002- 
 03, 2005-06 and 2007-08, the Revenue had raised objections and disallowed 
 commission/bonus payments made. The tribunal has decided the issue in 
 favour of the assessee in the aforesaid assessment years. The Revenue 
 preferred an appeal before the High Court for the assessment year 2005-06 
 in ITA No.1672/2010, which has been dismissed by this Court. 
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 6. In view of the aforesaid facts, we do not find any merit in the 
 present appeal and the same is dismissed without any order as to costs. 
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 SANJIV KHANNA, J. 
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 R.V.EASWAR, J. 
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 DECEMBER 15, 2011 
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 NA 
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 $ 61 and 62 
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