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2014 (9) TMI 498 - AT - Income TaxCommission on purchases treated as bogus – Held that:- CIT(A) has examined the issue in great detail - he has made enquiry from the suppliers as well as the party to whom commission was paid by the assessee in respect of purchases - the assessee's business was mainly dependent on the supply of goods from Auchtel Products Ltd. and therefore, the assessee had to pay the amount of commission on purchases - the assessee had agreed with the terms and conditions of the company and to compulsorily part with certain amount by way of commission to the sister concern of the supplier company which in the opinion of the CIT(A) was nothing but part of the sale consideration payable by the assessee company to the supplier company – thus, the order of the CIT(A) is upheld – Decided against revenue. Commission paid on sales and remuneration paid to Directors disallowed – Held that:- No commission was paid to M/s Klassic Enterprises Prop. Subash Bhagat in AY 1999-2000 and the amount of commission paid in AY 2000-2001 was only ₹ 2,94,387/- as against current year of ₹ 10,72,720 - When the assessee company was effecting sales to these customers in AY 1999-2000 also, when no commission was paid to M/s Klassic Enterprises Prop. Subash Bhagat, it cannot be said that these parties were introduced by this commission agent to the assessee - few parties are new to whom no sales was effected in AY 1999-2000 but when in majority cases, the claim of commission payment is found bogus, in respect of these few new parties also, it cannot be said that any service was rendered by this person to the assessee company because it is not possible to say that commission is to be compulsorily paid for effecting sale to a party for the first time and therefore, commission paid to him is allowable as business expenditure in the hands of the assessee even when the assessee is not able to establish that services were rendered by the agent – Decided against assessee. Although the AO has invoked the provisions of section 40A(2) of the Act but he has not established that the increase in remuneration to the directors is excessive or unreasonable. In the present case, the AO has compared the remuneration paid to these lady directors with the maximum salary paid to employees and has noted that the maximum salary given to one of the employees is ₹ 60,000/- p.a. and the salary of remaining employees is in the range of ₹ 30,000/- p.a. and he held that the salary payable to these directors can be allowed up to ₹ 50,000/- p.a. - to the third director i.e. Shri V. K. Duggal, remuneration was paid to the extent of ₹ 1,50,000/- and the same was allowed by the AO also - The AO also noted in the assessment order that a few vouchers have been signed by these lady directors also - the disallowance made by the AO out of the directors remuneration on the basis of comparison of salary paid to the employees of the assessee is not justified – Decided against assessee.
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