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2018 (1) TMI 748 - HC - Income TaxDisallowance of commission payments - expenditure wholly and exclusivily for busniss - Held that:- Addition are based entirely on suspicion. The assessee is a private party; it sources goods and commodities and trades in them in various countries in Africa. To secure contracts and also to ensure that payments are received in a timely manner and repatriated expeditiously, it utilizes the services of local agents in each country. From the angle of the Indian economy, the assessee’s efforts lead to export transactions, which in turn augment the foreign exchange resources; the assessee reports income, which is subjected to taxation. The commission expenditure laid out, therefore, can reasonably be linked with its business; its claim that it is laid out wholly for commercial terms is not fantastic; neither are the parties paid the amounts, bogus or dubious. In fact, they even confirmed receiving payments. By disallowing this expenditure, based on the AO’s personal understanding of how business ought to be conducted, the purpose of Section 37 was set at naught; besides, the AO virtually positioned himself in the armchair of the assessee, as regards the business conducted by it- an entirely untenable situation, that the law frowns upon. For these reasons, the court is of opinion that the concurrent findings of fact rendered by the lower appellate authorities do not call for disturbance. As in the case of commission expenditure, the AO’s conclusion that the sources of income towards deposits made were not disclosed or sufficiently proved, were correctly set aside by the lower authorities - Decided in favour of assessee.
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