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2017 (8) TMI 226 - AT - Income TaxAddition on account of excessive commission paid to agents - Held that:- Irrespective of the price at which the Assessee sold the soda ash to the customer, the rate of the commission payable to the agent was constant at INR 200/MT. During F.Y. 2010-2011, the Assessee sold a total of 5205 MT of soda ash. During the relevant period of December 2010 to March 2011 (i.e. when agents were hired), the Assessee sold 1085 MT of soda ash and therefore made a total payment of INR 2,17,000 (1085 MT x INR 200/MT) as commission. In F.Y. 2011-2012, the Assessee continued to use the agents it had hired for the entire year as opposed to the 4 month period in the previous year and the Appellant sold 4959 MT of soda ash and continued to make payment at the pre-agreed commission rate of INR 200IMT, which amounts to INR 9,91,800/- as commission. As evident from above, the hiring of agents resulted in an increase of approximately INR 45 Lakhs. In fact, during F.Y. 2010- 2011 (including December 2010 to March 2011), the average return of the Appellant on each MT of soda ash was approximately INR 11,066 (i.e. INR 5.76 Crore earned for the sale of 5205 MT). In contrast, due to the services provided by the agents, the average return of the Appellant on each MT of soda ash was approximately INR 12,522 (i.e. INR 6.21 Crore earned for the sale of 4959 MT). This is an increase of about INR 1,450 per MT of soda ash. From the above, the A.O. used a wholly baseless and erroneous calculation to determine the percentage of commission by dividing the commission paid by the total sales and not take into account the factors mentioned above. In view of the above there is no ground or basis for any disallowance - Decided in favour of assessee.
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