9911796707
TMI Blog1995 (3) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... rises. The three partners of the assessee firm were also partners in the firm of M/s Shah Enterprises. Therefore, the Assessing Officer(AO) invoked the provisions of s. 37 and s. 40A(2)(v) of the IT Act, 1961 and disallowed the entire commission of Rs. 5,18,471. 2. Further, the AO noticed that the assessee had paid export charges amounting to Rs. 7,50,050 to M/s Shah Enterprises. He noticed that the export charges paid @ 1.50 per kg. included a profit margin of 25 ps. per Kg. to Shah Enterprises and again he invoked the provisions of s. 40A(2) and disallowed a sum of Rs. 1,25,000. The assessee appealed. 3. It was contended before the CIT(A) that the three partners of the appellant firm had only 23% interest in the profits of M/s Shah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciate concern and to this limited extent service was rendered. He held that in the case of the agreement between Shah Enterprises and Ganapathy Exports Pvt. Ltd., the latter was appointed as an agent of the former and this was not the case with the assessee. Therefore, he felt that commission @ 2% of the export value of tea would be a reasonable payment for the services rendered by Shah Enterprises. To that extent, he deleted the disallowance. 5. As for the payment of export charges, he was of the view that the AO has made excessive allowance. Further scrutinizing the expenses account of the appellant firm and the Shah Enterprises, he was of the view that the expenses relatable to the export would not have exceeded 90 paise per kg. in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee were different and distinct from the services rendered by Ganapathy Exports Pvt. Ltd. to Shah Enterprises. It is in this view of the matter, the CIT(A) held that some service was rendered by Shah Enterprises and in that view of the matter, allowed 2% of the export value of tea as reasonable commission and sustained the disallowance @ 3%. No doubt the services rendered by Ganapathy Exports Private Limited, which was paid a commission of 5 to 6% was qualitatively different from the services rendered by Shah Enterprises to the assessee. However, but for Shah Enterprises, the assessee firm would not have been exposed to export markets. In fact, the first appellate authority himself has accepted that Shah Enterprises has introduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 paise per kg. was reasonable for Shah Enterprises and, therefore, held that payment of export charges @ Rs. 1 per kg. alone was reasonable. Thus, he made further disallowance @ 25 paise per kg. 8. Having heard rival submissions, we delete the enhancement as made by the CIT(A). When an assessee makes a payment to another person, it is not the concern of the assessee to see how much benefit is derived by the other person from such payment. The assessee makes the payment only to get rid of the botheration of attending to various functions in connection with its business and in this case in connection with the exports. Ofcourse, in a case falling under s. 40A(2)(v) the reasonableness of such payment can be enquired into. No comparable ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
