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2009 (11) TMI 81 - AT - Income TaxDisallowance of commission expenses - allowable business expenditure or not? - HELD THAT:- In the instant year, M/s Aswad Steels & Alloys (P) Ltd. had provided leads and out of which, nine parties were specifically converted into orders. The appellant has stated that seven parties pertained to sale/purchase transactions and two parties were commission based transactions. As regards sale/purchase transactions, according to the appellant, the total income earned was Rs. 27.36 lacs and, commission paid was Rs. 11.92 lacs and thus, there was net income of Rs. 15.45 lacs. So far as the commission based transactions are concerned, the appellant has submitted that it has earned commission of Rs. 46.54 lacs and paid commission of Rs. 25.58 lacs and thus, there is a net income of Rs. 20.96 lacs. Once the fundamental fact of payment of commission and allowability of commission as referral fee has been permeated through all the assessment years including the instant assessment year then the hypothesis adopted by the authorities below to hold that commission is not an eligible deduction is not tenable solely on the principles of consistency alone. It is settled law that in absence of any change either in facts or in law, principles of consistency itself can be made a basis to uphold the claim of the appellant company. As decided in the case of CIT vs. J.K. Charitable Trust [2008 (11) TMI 8 - SUPREME COURT if the fact situation changes then the Revenue can certainly prefer an appeal notwithstanding the fact that for some years no appeal was preferred. In our considered opinion, the payment by account payee cheque as per business agreement dt. 1st Aug., 2003, confirmation from payee is sufficient proof of rendering of services. The fact that providing leads is not their core line of activities or they have not stated such activity in its tax audit report cannot be a basis to suggest that they have not rendered services to the appellant company. Merely because the recipients of commission were also engaged in different line of business, was not a sufficient ground to hold that no services have been rendered as has also been held by the Tribunal in the case V.I.P. Industries Ltd. vs. IAC[1991 (1) TMI 187 - ITAT BOMBAY]. The factum of rendering of services is not explained by date of supplies or invoices raised. What has to be seen is whether services have been rendered, which has duly been established in the instant case. In our considered opinion, it is a case where disallowance has been made on surmises, conjectures and suspicion and it is settled law that no addition can be made on the basis of surmises, suspicion and conjectures - we hold that, appellant has duly established that services were rendered by M/s Aswad Steels & Alloys (P) Ltd. and hence is eligible for claim of deduction. Commission paid to M/s Shakumbhari Pulp & Paper Mill Ltd.- As there was no justification to suggest that payment of commission was not for services rendered. The objection regarding financial statement of M/s Shakumbhari Pulp & Paper Mill Ltd. is wholly irrelevant consideration and cannot be basis to disallow the claim of deduction. In our considered opinion here too, the authorities below have failed to appreciate the factual matrix of the case and proceeded on considerations which are wholly irrelevant to disallow the claim of commission made by the appellant company and, therefore the same is held to be untenable. We hold that the CIT(A) was incorrect in law and on facts in upholding the disallowance of claim of deduction and therefore, the same is directed to be deleted.
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