TMI Blog2012 (8) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... deleting the addition of commission of Rs.10,64,461/- though the job contract was repetitively procured from Sud Chemie India Pvt. ltd. directly and the assessee could not justify the need to pay the commission to M/s. Rupali Traders. 2. The facts leading to filing of the present appeal are that assessee is engaged in the business of job work of extrusion an firing process flow and calcinations and the case was selected for scrutiny accordingly, a notice u/s. 143(2) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) was issued and served upon the assessee. During the assessment proceedings, the Assessing Officer sought explanation from the assessee with regard to payment of sale commission of Rs.10,64,461/- including service tax paid to Rupali Traders a firm which is declared in Form No. 3CD of the audit report enclosed along with income tax return as the specified person covered u/s. 40A(2)(b) of the Act. The assessee vide written submission dated 01-12-2008 submitted that the sale commission to M/s. Rupali Traders of Rs.10,64,461/- is paid including service tax. It was submitted that M/s. Rupali Traders is a partnership firm consisting of two persons namely S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his explanation, the assessee could not justify the payment of sales commission made to M/s. Ruali Traders being specified person covered u/s 40A (2)(b) of the Act. The AO also on the basis of the statement of the Asstt. Manager accounts of M/s Sud chemie India Pvt. Ltd. came to the conclusion that no services in this regard to procure a job work as well as sales commission of company s collection of payment was required. Therefore, the AO was of the view that the assessee could not justify its claim of payment of sales commission which is also supported by the statement of Shri Daxesh Mehta, asstt-manager of accounts of M/s Sud chemie India Pvt. Ltd. and disallowed the payment of commission for sales promotion expenses of Rs.10,64,461/- and added the same to the income of the assessee. 3. The assessee feeling aggrieved by the assessment order passed u/s 143(3) of the Act filed appeal before the Ld. CIT(A). Before Ld. CIT(A), the submissions of the assessee were that the Assessing Officer failed to appreciate the nature and type of services being rendered by M/s Rupali Traders. It was submitted that the expenditure was genuine business expenditure and same was disallowed without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idences submitted and also the production-cum-marketing agreement between the assessee and M/s. Rupalia Traders since the inception of business and considered at the time of scrutiny assessment of the assessee in two years i.e. A.Ys. 1996-97 2003-04. It was submitted that AO had neither gone through the confirmatory letter dated 07-04-2009 from M/s Sud chemie India Pvt. Ltd. nor through the profit and loss account and balancesheet of M/s Rupali Traders though the confirmatory letter it was clearly mentioned nature of services provided by M/s.Rupali Traders various expenses such as salary, traveling, vehicle etc. were debited. The assessee submitted before Ld. CIT(A) that such income cannot be earned without incurring the relevant expenditure and the income vis- -vis expenditure had been correlated in respect of M/s Rupalia Traders. It was submitted that the assessee-firm had seven partners, out of which four were women partner and even Shri Rupesh Shah, who was managing partner did not have necessary qualifications in the field of ceramic engineering and salary was paid only to one partner, namely Shri Rupesh Shah. It was submitted by assessee that technical process involved was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aiming such expenditure throughout only in this year such expenses are disallowed. Ld. AR reiterated the submission made before the Ld. CIT(A) and submitted that there is no loss of revenue as there is no tad evasion. Ld. AR relied upon CBDT Circular No.6P dated 06-07-1968 and also placed reliance on the judgment of Hon ble Bombay High Court in the case of Indo Saudi Services (Travel) Pvt. Ltd. (supra). 5. We have heard the rival submissions, perused the material on record and the Judgments cited. On our query to the Ld. DR about the acceptance claim of assessee of expenditure as sale promotion commission for the A.Ys. 1996-97 2002-03 under scrutiny assessment she was not in a position to comment on the same. Admittedly, there is no rebuttal of the fact the expenditure with regard to the sales promotion commission paid to M/s. Rupali Traders was allowed in earlier years. The relevant contents of the order of the Ld. CIT(A) are reproduced herein below:- 4. I have carefully considered the facts of the case, Assessing Officer's findings and appellant s submissions. The Assessing Officer disallowed commission paid to M/s Rupali Traders not by invoking provisions of section 40A( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same has been allowed as a deduction all along, including twice under scrutiny assessments. There is a production-cum-marketing agreement as well between appellant and M/s. Rupali Traders, as per which, M/s. Rupali Traders is to assist in production and offer technical expertise to ensure job work quality. The fact that MM/s. Rupalil Traders incurred various kinds of expenses to earn the commission income also supports the genuineness of transactions between appellant and M/s Rupali Traders. Moreover, M/s. Rupali Traders is assessed to tax in the same tax slab and Shri Ramesh Shah pays tax in the highest rate slab by including interest of Rs.1,50,512/- received from M/s Rupali Traders. As such, no case of tax evasion is made out. CBDT s Circular No.6P and decision of Bombay High Court in the case of Indo Saudi Services (Travel) Pvt. Ltd., 310 ITR 306 are applicable to this extent. The Hon ble Supreme Court in the case of CIT Vs. Dharamraj Giriji Riya Narsingiriji 91 ITR 544 held that it is not open to the Department to prescribe what expenditure an assessee should incur and in what circumstances he should incur that expenditure. Every businessman knows its interest best ..... 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