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2005 (8) TMI 285 - AT - Income TaxDisallowance of commission - excessive and unreasonable portion in the total commission payment - legitimate need of the business - HELD THAT:- In the present case, neither the Assessing Officer nor learned CIT(A) has given any finding as to what is the excessive or unreasonable portion in the total commission payment. There is no finding on what is the legitimate need of the business. Both the authorities have gone by the principle that since in the earlier year the amount paid was .94 per cent, the excess becomes unreasonable. In our opinion, this approach is not correct. There is no presumption that whatever was paid in earlier year only becomes reasonable and anything in excess becomes unreasonable. There may be several reasons that the assessee may pay lower commission in initial years. However, the finding, which is required, is what is the reasonableness or excessiveness for the year under appeal. Looking to the background of Shri Sharma and the nature of services rendered by him, we find that payment of commission at 2 1/2 per cent cannot be considered as excessive or unreasonable. The partners of the firm are merely female partners whereas Shri S.K, Sharma is an influential person, who retired from M/s. MICO Ltd. as Senior Vice President and is able to influence the said company, which is one of the top most customers of the appellant-firm. We accordingly hold that no part of commission can be disallowed invoking the provision of section 40A(2) of the Act. In the result, the appeal is allowed.
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