TMI Blog2015 (5) TMI 744X X X X Extracts X X X X X X X X Extracts X X X X ..... eads as under : On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting disallowance of ₹ 83,20,174/- as the AO was justified in making disallowance of 20% of the discount and credit notes allowed by the assessee to his clients, without any material basis. 2. Facts of the case in brief of that the assesssee was engaged in the business of Cargo Agency of various Airlines and the received commission as per freight booked. The assessee filed the return of income on 29.9.2008 declaring total income at ₹ 3,99,37,890/-. Later on the case was selected for scrutiny. During the course of assessment proceedings the AO noticed that the total receipts from commission as per TDS Certificate was at ₹ 55,80,92,528/-, but the commission disclosed by the assessee was at ₹ 10,72,32,586/-. The assessee explained to the AO that the clients had deducted tax on the amount of freight collected by the assessee on their behalf. It was, further, stated that the CBDT Circular no. 452 dated 17.3.1986 clarified that for the purposes of Section 44 AB of on I.T.Act 1961 (here in after referred as the Act in short) in the case of commission agents, the tu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is fact is proved by following two instances :- a. The Ld. A.O. has alleged that credit notes allowed by you to various are not issued in a proper and sequential manner. In this regard, we have clearly mentioned in point no. 5 of our reply dated 31/12/2010 (page no. 46-49 of paper book-I) that different booklets have been issued to marketing people region wise or client wise and the system of issuing credit note is not centralized, therefore, sequence of s.no. shall not match. Despite the above submissions, the Ld. A.O. has not considered the same and without verifying the facts, made the addition on the basis of the same observations. b. Similarly, the Ld. A.O. has alleged that the discounts/credit notes given to party are not commensurate with the business generated by them. To support this observation, he has pointed out that gross receipt by the party from M/s Kasturi Sons amounted to ₹ 2,69, 28,427/-, no credit note or discount was allowed to it In this regard, we would again like to bring your honor s attention to our reply dated 31/12/2010 (page no. 46049 of paper book-I), wherein in para 2, assessee has clarified that details enclosed with our letter dt. 7/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts nor he has called for any confirmations of the parties. 7. As far as, allowing different rates of commission or discount to different parties is concerned, it was clarified during assessment proceedings itself that decision of allowing discounts/credit notes to customers depend on many criterion apart from the turnover generated from them. 8. Further, it is the businessman himself, who can determine the commercial expediency of any expenditure and can take decision as to whether such expenditure is necessary for the overall growth of the business or not. Apart from that, we are looking only the financial expediency of the expenditure, whereas there may be many other factor, which a businessman will take into consideration before incurring any expenditure like long term benefit to the business, development of relationships with dealer, establishing good image in the market etc. The decision of incurring such huge expenses was taken by the assessee after taking so many points into consideration and has even earned profit of ₹ 439.30 lacs @ 29.50% of gross receipts. In these circumstances, the Ld. A.O. is not justified in questioning the genuineness of expenses and di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is also argued that the expenditure fulfils all the conditions laid down in section 37(1) of the Income Tax Act for alowability of business expenditure, and no payment has been made to any related party as would attract the provisions of section 40A(2)(b). It is submitted that as against discounts allowed to its dealers of ₹ 4.16 crores out of gross income of ₹ 14.88 crores in the year under consideration, it had allowed discounts of ₹ 2.60 crores out of gross income of ₹ 11.79 crores in the immediately preceding year. It is also argued with reference to a number of case laws that commercial expediency is a matter to be left to the judgement of the assessee, and it is not for the Revenue to question the expediency of expenditure. As held by the Calcutta High Court in the case of Ravi Marketing Pvt. Ltd. Vs. CIT(2006) 280 ITR 519, whether an expenditure is expedient for the purpose of business is to be looked at by the income tax authorities or the Court from the view point of the assessee, not from its armchair. It is not for the Court or the income tax authorities to suggest or advise, to presume or surmise as to the expedience. The Bombay High Court h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of customers to whom credit notes/discounts of over ₹ 10,00,000/- had been allowed. After careful consideration, the disallowance made of ₹ 83,20,174/- is deleted. 5. Now, the department is in appeal. The Ld. D.R. for the revenue reiterated the observations of the AO made in the assessment order dated 31/12/2010 and the remand report dated 15.3.2013. In his rival submissions, the Ld. Counsel for the assessee reiterated the submissions made before the authorities below and strongly supported the impugned order passed by the Ld. CIT(A). 6. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the assessee was receiving the commission from various Airlines. The AO noted the discrepancy in the amount shown in P L Account vis- -vis the amount mentioned in the TDS certificates. The assessee also gave credit notes and discount to the parties through whom Cargo bookings were done. In the instant case, the AO did not point out any specific instance were the expenses incurred by the assessee were not for the business purposes or those were not incurred in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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