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2006 (3) TMI 223 - AT - Income TaxDisallowance on business development expenses - business activities in Delhi undertook the work of supply of uniform for the first time in J&K in this year- duly authorized agent - payments received from the Government through banking channel - HELD THAT:- In view of the documentary evidence filed on record, it is established that the volume of business of the assessee-company assumed big boost on account of supply of garments to the Government of J&K. In the immediately preceding year the assessee had shown net profit of Rs. 2,171 only whereas in the assessment year under consideration its net profit went up to Rs. 13,06,958. This boost was definitely on account of the contract for supply of school uniforms cloth by the assessee. In any case, if the agent was not assessed to tax or if he did not appear before the learned CIT(A) despite request of the assessee, the assessee cannot be blamed for the same. So far as the rendering of service is concerned, there may not be a written agreement but the circumstances of the present matter strongly establish that without the services of the commission agent the assessee could not achieve such business result as has been achieved by him. The business development expenses are, therefore, fully justified as the rendering of service is proved from the circumstances of the present matter. On going through the entire documentary evidence, filed on record and in particular on appreciating the circumstances of this matter we find force in the submissions of the learned counsel for the assessee and hold that the payment of commission by the assessee was for business purposes and the same was fully justified. We, therefore, set aside the finding of the learned CIT(A) and delete the disallowance of Rs. 12,54,388. Ground is allowed. In the result, assessee's appeal is allowed for statistical purposes only.
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