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2017 (4) TMI 247 - ITAT AHMEDABADDisallowance of commission paid by the assessee - Held that:- In the case of Voltamp Transformer Pvt. Ltd. [1980 (10) TMI 35 - GUJARAT High Court] and CIT Vs. Dalmia Cement Ltd., (2001 (9) TMI 48 - DELHI High Court) we find that the assessee has filed confirmation. It has disclosed various details of commission recipients; it has disclosed sales made through such persons and also disclosed rate of commission. The assessee has submitted complete basic details. The ld.AO has re-appreciated these details, but he could only point out defects in the details. He disallowed the commission payment on the basis of general practice i.e. commission payment ranges in between 1% to 2% in this line of business. Such an issue will differ on case to case basis. The AO has not made reference to any other assesses. More so, when the assessee has established business, he might not be required to pay commission, but a new entity in the process of its establishment might have paid higher rate of commission. The ld.AO failed to give any specific defects. The reference to market rate of commission has no bearing to test the genuineness of the expenditure incurred by an assessee. The ld.CIT(A) has rightly appreciated the circumstances and rightly deleted. As far as salary expenses are concerned, the ld.AO was of the view that the assessee was not required 21 employees. Again we are of the view that this aspect ought to be left to the requirement of businessman. As far as outstanding salaries are concerned, the assessee has pointed out that on account of financial crunch, salary could not be paid in the first view monthly, and ultimately all arrears were cleared. This was not such a strong circumstance which can doubt the existence of employer-employee relationship between assessee and its staff. Therefore, we do not any merit in ground no.2 also. It is rejected. Disallowance of salary paid to the partner AO has disallowed the salary paid to two female partners on the ground that one of them is a simple graduate and she might not be having day-to-day knowledge of business. The ld.CIT(A) has deleted this disallowance by observing that one of the female partner was doing chemical business since 1999 and she had been filing income-tax return. Other lady partner has also B.Com. graduate. The AO has drawn inference without anything on record. On due consideration of the above facts and circumstances, we are of the view that the ld.CIT(A) has rightly deleted the disallowance. It is also pertinent to observe that salary to the partner is being regulated by the provisions of section 40(b) of the Income Tax Act. It is to be paid in accordance with the provision stipulated in the deed which should be in commensurate with the provisions of section 40(b) of the Income Tax Act. On such salary payment, provisions of section 40A(2) cannot be invoked. On due consideration all the facts, we do not find any merit in these grounds of appeals. They are dismissed.
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