TMI Blog1993 (9) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... ate information on all developments that took place. The assessee having no office anywhere, had to necessarily depend upon the offices of the party in the interest of its business and due to maintaining of such close relations, the company had been successful in the export of over 800 deep bore pumps, at a high price of US $ 1490 per pump. The pump that was sold locally for Rs. 1,075 each, fetched as much as Rs. 10,750, i.e., over ten times and after payment of commission and other expenses, it still left the company with a margin of Rs. 3,250 per pump. 14. TheBombayparty had initially demanded 10% as its commission and after persuasion agreed for 7 1/2%. The party at Bombay was required to provide services at Bombay port, for ensuring prompt clearance, loading into the carriers, comply with such formalities as are necessary in connection with the export of goods and also maintain liaison with the Nigeria office UK office and provide latest information on approval, payments, testing and the like. The party atBombayhad provided active support in the export of the goods and practically allowed the assessee to be free from any problems that are faced at the ports, such as availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support of his arguments and the claim for deduction of the commission payment. 16. Mr. Home Rai Khan submitted that, the evidence available on record indicated that, the assessee had contacts with theUKparty even before the correspondence with theBombayparty and therefore, the claim that, the export order got revived due to the intervention of theBombayparty is not correct. Referring to the observation of the CIT(A), he pleaded that, the agreement as entered on18-2-83, is only a play, because, prior to the agreement, the assessee had been dealing with theUKparty and there was no necessity to bring theBombayparty. He contended that, the restoration of the export order was by theUKparty, that had its office atNigeriaand the correspondence with theBombayparty is only to cover up the splitting up of the commission payable toUKparty, due to the restriction placed by RBI. He contended that, theUKparty insisted for 20%, which was not permitted by RBI, because the commission normally permitted was 10% and considering the special circumstances, the RBI had permitted 15%. He pleaded that, theBombayparty had not rendered any service and the correspondence only shows they were to look afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to reachKanoby March 11. This letter further states that, Mr. Erry, the General Manager of the appellant company is being deputed toNigeriafor the demonstration and that, he is familiar withNigeriaand Chellarams inKanoand that he is likely to be atKanoby March 20. It also requested theBombayparty to inform it, in case of any development. TheBombayparty vide its letter of April 5 had intimated that, the demonstration was successful and it is hoped that, they would be able to persuade them to place the order. On May 2, theBombayparty advised that, the Nigerian authorities are quite favourable and that they had insisted on reduction in the price by US $ 50,000, which might be adjusted against the air-freighting of few pumps, which marginal adjustment may be agreed to. On June 10, the assessee wrote to theBombayparty that the contract was accepted on May 30 by its General Manager Mr. Erry, SADP accepting the additional price of US $ 67,000 to be adjusted against the air-freighting of 120 pumps, which pumps, were to be air-freighted shortly, the intimation of which would be provided. On August 4, the assessee wrote to the Bombay party that, the documents had not been sent on the advic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided before any of the authorities below, which the counsel prayed for being taken into consideration, because it is a mere extension of the earlier pleadings of the company and should not be rejected as a fresh piece of evidence. The departmental representative Mr. Khan, submitted that, the certificate is of no help to the company, because it is a mere statement of receipt of commission, but, does not spell out the service that was rendered by theBombayparty. He contended that, since, nothing would turn on the certificate, he has no objection of it being considered. 22. The certificate dated25-2-88provided by theBombayparty, is a replica of what has been submitted by the appellant in its note on the commission payment. The certificate of the Chartered Accountant dated25-7-1990, merely confirms the receipt of commission in terms of the agreement between the parties. For the sake of facility, the certificate of theBombayparty dated25-2-1988, is re-produced below: (1) Provided communication channels betweenIndia Nigeriathrough our communication system in view poor communication facilities available at that time. (2) Advised you from time to time in connection with preparation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had all along kept the Bombay party posted with the entire developments. Even the claim that, the Bombay party was following up the payments, is clearly false, because, the correspondence as placed on our record, only goes to show that, the party was unaware of the payment situation. In regard to supply of 120 pumps, the official of the assessee, had hand carried the documents, the General Manager visits Africa to get the bills passed, which all go to indicate that, the assessee had been doing all the follow-up action by itself. In regard to the establishing of communication channels betweenIndia Nigeria, liaison with Inspectors for inspection and obtaining of satisfaction report, assistance in connection with location of proper sailing, no evidence is available on the record. The perusal of the correspondence between the assessee and theBombayparty, shows that, it was the assessee, that has managed all the shipments of the consignments. If as alleged, it was for theBombayparty to manage the shipments and it was that party that located the carrier, then, it would have intimated the appellant about the shipment, but, instead, it was the assessee that had ensured that theBombayparty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired to render any service and therefore, it never rendered any service. The commission of Rs. 7,40,517 was stated as payable to theBombayparty, of which that party has provided a confirmation for receipt of Rs. 7,08,205 and it has been confirmed that theBombayparty has been assessed on the commission income. Shri Dinodia had placed reliance on the Supreme Court ruling in J.K. Woollen Mfrs. v. CIT [1969] 72 ITR 612, in support of his contention that, the commission that was paid for creating of mutual interest in the business of the assessee and that, it was so paid for the reason that, it enabled the company to reap huge profits, that was as much three times the local sale price. For the same proposition, he placed reliance on the Gujarat High Court decision in Swastic Textile Co. (P.) Ltd. v. CIT [1984] 150 ITR 155. Mr. Rai Khan, the departmental representative placed reliance on the Bombay High Court decision in Goodlas Nerolac Paints Ltd. v. CIT [1982] 137 ITR 58, for the proposition that, it is for the assessee to establish the purpose for which the commission was paid, duly supported with evidence of services rendered by the party. He contended that, in the case before the Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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