Financial Daily from THE HINDU group of publications
Friday, Sep 23, 2005
Financial Daily from THE HINDU group of publications Friday, Sep 23, 2005 |
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Opinion
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Letters Business commissions
According to Section 198 read with Section 268 of the Companies Act, 1956, there is a ceiling of 10 per cent of the profit payable as commission to all the directors of a company, but subject to approval of the AGM. The company should provide for the same at the end of the financial year on accrual basis of accounting and hold its AGM within six months. In this context, the commission paid by the company to its directors is allowed as a deduction in the hands of the company. On the other hand, business commission paid by the company is given in the subsequent accounting year. Hence, the commission can be taxed on receipt basis in the hands of the recipient only in the year in which it is received. In view of the above, it does not sound logical to tax the business commission on accrual basis. There is therefore a strong case for amending the provisions of Section 15 of the IT Act to overcome this anomaly and avoid the confusion in arriving at the returnable income. In this context, it is suggested that as in Section 115 (O) of the IT Act, where dividend tax is payable within seven days from the date of declaration of dividend a parallel approach could be adopted taxing business commission also by suitably amending the provisions of Section 15. By this, the net result would be that the assessees would not be subjected to payment of tax merely on presumption of quantum income, by way of business commission and at the same time the income will not escape the tax net. E. Govindan S. Muralidharan Chennai
Letters to the editor and contributions can be sent by e-mail to: bleditor@thehindu.co.in
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