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2021 (4) TMI 767 - ITAT HYDERABADDisallowance of compensation paid - CIT-A deleted addition - HELD THAT:- We observe that in the remand report the AO stated all the replies from the commission recipients are stereo-typed, they have not done any such business either before or after this transaction. The important aspect the CIT(A) missed while directing the AO to delete the addition is that he ignored the remand report submitted by the AO which is based on the statements of beneficiaries recorded and evidences gathered during the course of remand proceedings. As relying on DURGA PRASAD MORE [1968 (8) TMI 17 - SUPREME COURT] we set aside the order of the CIT(A) and restore that of the AO wherein his categorical finding is that the claim is far from truth and concluded that the assessee failed to produce any evidence that the commission agents rendered any services in course of business. It also failed to produce that any agreement entered into between the parties regarding nature of works to be done, rates of commission, terms & conditions for payments, etc. We also observe from the quarterly TDS returns that all the commissions have been debited only on 31/03/2009. It is also not clear that when the actual payments were made. From the details filed by the assessee in the paper book which contain 55 payees amounting to ₹ 2,45,40,000/-. It is also beyond our understanding that after discharging his/her work, they do not know how much commission they are going to get, but only they come to know the same on 31/03/2009 when the entries were passed in the books of account of the assessee. - Decided in favour of revenue Disallowance of compensation loss claimed - CIT(A) directed the AO to allow the compensation loss claimed - HELD THAT:- As during the financial year relevant to the assessment year 2009-10, the assessee has entered into number of transactions for supply of MS flats, MS angles, etc., with M/s. Shalini Steels (P) Ltd and Vijay Iron Foundry (P) Ltd. The transaction was for supply of steel products in the month of December, 2008 at the agreed price. The transactions entered into are contended by the assessee to be in the nature of hedging transactions in order to safe-guard the company and as a precautionary measure, in the course of business carried on by it and, therefore, they fall proviso in clause (a) to sub-section (5) to Sec.43 of I.T. Act. From the purchase orders given to Shalini Steels (P) Ltd & Vijay Iron Foundry (P) Ltd, ,it can be found that they are for purchase of MS angles, MS flats, etc., there is no description and specification of the material required by the assessee company which do not match the requirement of CPDCL. In view of the above, the transactions with M/s. Shalini Steels (P) Ltd and M/s. Vijay Iron Foundry (P) Ltd cannot be compared with the transactions in the invoices/bills furnished as additional evidence. As submitted by the ld. AR in his written submissions in respect of any hedging transaction, the same should be backed by adequate availability of raw material/the material required under contract in the hands of the supplier so that the contract can be fulfilled in case delivery is required. This condition has not been met because it has been categorically stated by the Managing Directors of Shalini Steels {P} Ltd & Vijay Iron Foundry {P} Ltd in their sworn depositions that the supplier companies did not have the stock in the required quantities as on the date of cancellation. Nor at any other time within the contract period, was the material manufactured by the companies and informed to the Central Excise Authorities of the existence of the goods to be supplied. In such a situation, the ingredients of the hedging transactions are not fulfilled, therefore, on this count also, it has to be held that the loss incurred by the assessee is only in the nature of speculative loss. CIT(A) before directing the AO to allow the compensation loss claimed by the assessee held that “I am not inclined to accept the view of the Assessing Officer that the cancellation of the work orders by the appellant and consequently paying compensation is an arranged transaction with a view to reduce profits or for the matter a speculative transaction.” No infirmity in the order of the CIT(A) - Decided against revenue.
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