TMI Blog2018 (8) TMI 844X X X X Extracts X X X X X X X X Extracts X X X X ..... Satyajeet Goel, C. A. Department by : Shri S. L. Anuragi, Sr. D. R. ORDER Per Prashant Maharishi, A. M. This appeal is filed by the assessee against the order of Commissioner of Income Tax (Appeals) 12, New Delhi, dated 12.02.2011, for assessment year 2010-11 confirming that addition of ₹ 9,31,957/- on account of commission paid to M/s. Ashapura Associates @ 7% against the rate of 5% paid to other commission agents, disallowed by the learned Assessing Officer, under section 37 of the Income Tax Act. 2. The brief facts of the case is that assessee is a partnership firm engaged in the business of manufacturing of auto parts. Assessee filed its return of income at ₹ 2,37,41,360/-, which was assessed at ₹ 2,69,45,593/- vide order under section 143(3) of the Act on 25.03.2013. The issue involved in the appeal is payment of commission of ₹ 9,31,957/- paid to M/s. Ashapura Agencies, which was disallowed by the learned Assessing Officer vide para No. 3 of his order, holding as under :- 3.1 During the year, the assessee has debited a sum of ₹ 2.24.31.837/- under the head Commission on Sales. The details tiled by the assessee in this re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the other two months notice . b) If any order received from the agent proves to be a bad debt or results in a loss to the firm, the Jinn shall be entitled to deduct the loss so caused from the commission earned by the agent in respect of that order. In the case of agreement between the assessee and M/s. Ashapura Associates all direct and indirect expenses i.e. Rent Electricity. Telephone and Staff Salaries etc. shall be borne by the assessee despite payment of commission @ 1% to this party. On the other hand in other eases all direct and indirect expenses i.e. Rent, Electricity, Telephone and Staff Salaries etc. shall be borne by the Commission Agents in spite of their being paid commission @ 5%, in fact the agreement between the assessee and M/s. Ashapura Associates is completely identical to the agreement between the assessee and another commission agent M/s. Asian Motors, Patna except that the latter party is entitled to commission of 3% as against 7% payable to M/s Ashapura Associates. M/s. Asian Motors, Patna like M/s. Ashapura Associates is also not under an obligation to bear the direct/indirect expenses. The assessee was required to explain the wide diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oicates and M/s Asian Motors on identical terms and conditions. As regards nature of services rendered by M/s. Ashapura Associates there is no difference between the services rendered by this party and other parties, as die scope and nature of services to be rendered by all these commission agents are specifically provided in their respective agreements. Rather M/s. Ashapura Associates is not under an obligation to bear direct/indirect expenses like many parties such as M/s. Swaraj Motors and Shri Binay Bajaj, who are getting commission only w 5% It is pertinent to point out that the assessee has itself admitted that in the next year it has also reduced the rate of commission payable to 5% in the ease of M s Ashapura Associates. 3.3 Although, the assessee and M/s. Ashapura Associate are not parties covered by the provisions of section 40A(2) of the Income Tax Act, 1961. However, as per the provisions of section 37 for being allowed any expenditure has to be expended wholly and exclusively for the purposes of business. The Hon ble Supreme Court in various decisions held that taxing authorities have right to consider whether expenditure incurred by the assessee was excessive. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his issue, it cannot be said that the assessee has shown any prudence by paying commission @ 7%, while the assessee paid commission to other parties @ 5%, on terms which are more favourable to the assessee than the terms as per agreement with M/s. Ashapura Associates and @ 3% to M/s. Asian Motors. Patna on the same terms as with M/s. Ashapura Associates. Therefore, after taking into consideration all the facts it is held that commission paid to M/s. Ashapura Associates is at least excessive by 2% as at the most only commission paid @ 5% to this party can be considered as having been expended wholly and exclusively for the purpose of business. The assessee has paid total commission of ₹ 32.61.849 to M/s. Ashapura Associates during the F.Y.2009-10. out of which a sum of ₹ 9,31.957/- is being disallowed as not having been expended wholly and exclusively for the purpose of business. 1 am satisfied that the assessee has furnished inaccurate particulars of its income and therefore, penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961 are being initiated against the assessee. (Disallowance : ₹ 9,31,957/-). 3. The assessee carried the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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