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TMI Blog2013 (1) TMI 569X X X X Extracts X X X X X X X X Extracts X X X X ..... p; (1) The ld. CIT(A) erred in confirming a sum of Rs.17,20,403/- in respect of commission when the expenditure was incurred for the purpose of the business. (2) The appellant submits that the ld. CIT(A) has not properly construed the facts and evidence placed before him. (3) On the facts and circumstances of the case, the disallowance is required to be deleted. (II) Disallowance of Interest:- (1) The ld. CIT(A) erred in disallowing a sum of Rs.79,692/- out of interest of Rs.5,57,130/- when the borrowed funds were not utilized for giving advance to Motilal Synthetics and evidence thereof ought to have been taken into consideration. (2) On the facts and circumstances of the case, the disallowance has been wrongly made and is required to be deleted. (III) Miscellaneous:- (1) The ld. CIT(A) erred in not considering charge of interest u/s 234B of the Act. 3. 1st Ground: Addition of Rs.17,20,403 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion made by the appellant and the observation of the A.O. I have perused through copies of submission given by the appellant before the A.O. from time to time as well as the copies of annexures enclosed with them. From the submission and the annexures attached, it is clear that the appellant has only given copies of bills and copies of credit notes, copies of debit notes, copy of ledger account and copy of resolution of Board of Directors. There is not a single document or evidence which shows that M/s Motilon Synthetics had rendered any services at all. There is nothing on record to show any effort that might have been made to ensure the safety of payments. In view of this reason, I agree with the A.O. that the decision of the Hon'ble Supreme Court in the case of Lachiminarayan Madan Lal (supra) and Swadeshi Cotton Mills Ltd. (supra) are squarely applicable. The Hon'ble Supreme Court in both the cases have clearly stated that mere existence of an agreement with selling agents or payment of commission does not prove that services are rendered and that the payment is wholly and exclusively for the purpose of business. This proves that the services were not rendered and the payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged that the disallowance made by AO be deleted. 5. On the other hand the Ld. D.R. pointed out to the letters written by the parties to Motilon Synthetics (at page 52 to 57 of paper book). He pointed to the fact that the letter heads of the partners only has the name and their addresses. The other details like the phone numbers, fax nos, Sales Tax Nos. etc are not indicated and therefore their identity could not be proved. He thus supported the order of AO and CIT. 6. We have heard the rival submissions and perused the material on record. The factual position is that the assessee has paid commission of Rs.1704203 (@ Rs.0.50%) for high seas sales to a firm in which the directors hold substantial interest. The payment has been disallowed by AO by invoking the provisions of S. 40A(2b) of the Act. While upholding the addition, CIT(A) has inter alia given finding that no document has been furnished which would substantiate the rendering of service by the firm to the assessee or any evidence to show that firms were introduced by the firm or the sales were brought in by the firm. From the sample copies of correspondence entered by the parties with Motilon it can be seen apart from the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter before CIT(A) and thereafter before ITAT. ITAT vide order dated 12.8.2009 set aside the matter to the file of CIT(A) to pass a speaking order. Pursuant to the order of ITAT, CIT(A) after considering the submissions of assessee upheld the order of AO by holding as under:- "I have considered the submission made by the appellant and the observation of the A.O. The fact that the assessee has borrowed interest bearing funds from its sister concern and also given interest free funds to the sister concern are not disputed. On these facts the position of law is settled by the decision of the Hon'ble Supreme Court in the case of S.A. Builders (288-ITR-1) wherein the Hon'ble Supreme Court stated that if the loan/advance have been given to the sister concern or anyone else without charging interest then what is important to see is whether the loans and advances are given are for commercial expediency or not. No disallowance can be made when the assessee proves its commercial expediency on loans and advances given. However, neither before the A.O. nor during the appellate proceedings, the appellant has been able to show any commercial expediency whereby it was re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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