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2017 (12) TMI 424 - AT - Income TaxDisallowance of commission paid - Held that:- In the instant case, there is no such finding recorded by the ld AO in his order. The revenue had not brought any material on record to prove that M/s R.N. Forgings Pvt. Ltd is a related concern of the assessee. The ld AO himself in the instant case had acknowledged the agreement for commission has been entered into on 18.3.2009 and the services are expected to be rendered by R.N. Forgings Pvt. ltd effective from 1.4.2009 onwards. Hence the reliance on the decision of the Apex Court by the revenue is totally misplaced and is not applicable to the facts of the instant case before us. With regard to the usage of brand name ‘Nimbus’ by NIPL as observed by the ld AO, it would be relevant to note that M/s NIPL was incorporated on 13.9.95 and whereas the assessee firm was started on 6.6.2001 and the usage of the name ‘Nimbus’ by both the parties is just a coincidence. If at all, any usage of brand name is alleged, it is actually the other way round i.e. the assessee firm had used the brand of Nimbus from NIPL and not as stated by the ld AO. AR stated that the entire payments of commission to R.N. Forgings Pvt. Ltd had suffered service tax and were made by account payee cheques after due deduction of tax at source and TDS returns were duly filed with the income tax department. These facts are not disputed by the ld DR before us. CIT-A had rightly deleted the disallowance of commission paid to R.N. Forgings Pvt. Ltd - Decided in favour of assessee. Disallowance of commission paid to three other individuals namely Mahendra Kumar Bharatia, Rajendra Kumar Bharatia - disallowance made for want of written agreements and on the count that single bill has been raised by those commission agents for the services rendered to the assessee in March 2010, whereas the assessee firm was no longer in existence from 20.1.2010 - Held that:- We find that the assessee had duly informed the assessee in writing that the commission has been paid to these parties for sales effected to certain parties which were given in its reply letter filed before the ld AO. The sales made to those parties had not been disputed by the revenue. We find that all these three commission agents had duly accounted for the commission received from the assessee in their respective income tax returns and paid taxes thereon. The business expediency of these commission payments also stands proved in as much as the assessee could achieve some reasonable turnover with the respective customers only due to the indulgence of these commission agents and services rendered by them during the year under appeal. These facts were submitted in writing before the ld AO. This goes to prove that the services of these commission agents were indispensible to the assessee during the year under appeal. No verification has been carried out by the ld AO with the AO of these commission agents to understand the nature of services rendered by these parties to the assessee and the genuinity of the claims made by the assessee. In these circumstances, we hold that the lower authorities had erred in disallowing the commission payments to these three parties. Accordingly, the grounds raised in the cross objections of the assessee are allowed. Disallowance of excess interest paid to persons covered u/s 40A(2)(b) - Held that:- It is not in dispute that these unsecured loans are brought forward from earlier years and terms and conditions of interest had been understood in those relevant years. Hence the same cannot be made comparable with the rates prevailing in this year. We find that the assessee had paid interest at the rate of 18% p.a. on unsecured loans received from persons covered u/s 40A(2)(b) of the Act which is less than interest paid even on secured loans. As long as the borrowed funds had been used for business purposes, merely because interest is paid to parties covered u/s 40A(2)(b) of the Act, the same cannot be disallowed on the ground it being excessive. In the instant case, in our opinion, the interest paid on unsecured loans at the rate of 18% per annum is not at all excessive compared to the other secured loans availed by the assessee. Hence we do not deem it fit to interfere with the order of the ld CITA in this regard. Accordingly, the Ground No. 4 raised by the revenue is dismissed. Disallowance of interest on the loans availed by the assessee - Held that:- The assessee had duly submitted the complete utilization statement of the loans availed. From the same it could be evidenced that the loans have been utilized only for business purposes by the assessee. The entire details of loan creditors were duly placed on record before the ld AO regarding their identity, creditworthiness and genuineness of the transactions. In any case, we find that no addition has been made towards the loan amounts in the assessment. Once the loan amounts have been accepted as genuine and its utilization thereon for business purposes is proved, the allowability of interest thereon u/s 36(1)(iii) is automatic. Hence we hold that the ld CITA had rightly deleted the disallowance of interest
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