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2015 (12) TMI 375 - ITAT MUMBAI

2015 (12) TMI 375 - ITAT MUMBAI - TMI - Addition on account of bogus purchases - CIT(A) deleted the addition - Held that:- No reason to interfere with the decision of the learned Commissioner (Appeals) on this issue. As can be seen, the learned Commissioner (Appeals), on verifying the books of account of the assessee for the relevant assessment year has given a factual finding that the actual purchases made by the assessee during the year under consideration from Samarth Enterprises, was to the .....

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disputed by the learned Departmental Representative that the assessee is continuously following the practice of payment of dividend as well as commission to the directors from past several years. It is also not disputed that the dividend payment to directors over the years has increased substantially and for the impugned assessment year, as noted by the learned Commissioner (Appeals), the assessee has declared dividend of approximately 55% of the profits. It is also not denied that the assessee .....

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questioned such commission payment. As rightly held by the learned Commissioner (Appeals), there being no nexus between the two payments i.e., commission and dividend to the directors, the disallowance made could not have been sustained. Accordingly, we uphold the order of the learned Commissioner (Appeals) - Decided against revenue. - ITA No. 6270/Mum./2013 - Dated:- 30-9-2015 - Rajendra, AM And Saktijit Dey, JM For the Appellant : Shri Vivek Butra For the Respondent : Shri S Singhi ORDER Per .....

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f submersible pumps and its accessories. For the assessment year under consideration, the assessee filed its return of income on 28th September 2010, declaring total income of ₹ 6,80,44,242. During the assessment proceedings, on the basis of information received from the Director General of Income Tax (Inv.), Mumbai, to the effect that purchases effected by the assessee are bogus, the Assessing Officer called upon the assessee to furnish the details. From the material on record, he noticed .....

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t it has purchased goods from Smarth Enterprises for the financial year 2009- 10 for an amount of ₹ 11,238 and for the financial year 2010-11, for an amount of ₹ 5,129. In support of such claim, the assessee also submitted ledger account, copies of bills, delivery challans, etc. The Assessing Officer, however, was not convinced with the statements made by the assessee. He observed that Smarth Enterprises is only an entry provider which has been found by the sales tax authorities. The .....

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al before the first appellate authority. The learned Commissioner (Appeals), after considering the submissions of the assessee in the light of the facts and material on record, found that the assessee during the relevant previous year, has recorded purchases of ₹ 11,238, from Smarth Enterprises, in its books of account. He, therefore, directed the Assessing Officer to restrict the disallowance to that amount. Being aggrieved, the Department is in appeal before us. 5. Having considered the .....

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nt has failed to bring any material before us to disturb the aforesaid factual finding of the learned Commissioner (Appeals). That being the case, we uphold the order of the learned Commissioner (Appeals) by dismissing the ground raised by the Revenue. 6. The next issue raised in ground no.2 and 3, is against the decision of the learned Commissioner (Appeals) in deleting the addition made of ₹ 47,19,138, on account of disallowance of commission paid to directors. 7. Briefly stated the fact .....

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spectively. The Assessing Officer being of the view that commission paid to directors is not an allowable expenditure under section 36(1)(ii) of the Act, proposed to disallow the same. The assessee objecting to proposed disallowance submitted, as per the usual practice followed by the assessee, the company has paid commission to its directors @ 3% on the profits earned during the year. It was submitted, the commission is calculated as per the provisions of Companies Act, 1956, as a part or whole .....

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expenditure is the amount payable to employees as bonus or commission should not otherwise have been payable to them as profit or dividend so that tax avoidance by distributing profit by way of bonus or commission amongst the number of employees could be checked. The Assessing Officer observed that by paying commission, the assessee distributed its profit to its shareholders without paying dividend distribution tax. Relying upon the decision of the Tribunal, Mumbai Bench, in Dalal Broacha Stock .....

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d 2010-11 and the dividend declared in each assessment year has progressively increased. The assessee has also paid dividend distribution tax accordingly. He also noticed that for the aforesaid assessment years, the assessee had been uniformly paying commission @ 3% of the profits in terms with the provisions of Companies Act, 1956. He also found that commission in fact is being paid to the directors for almost 22 to 25 years. He, therefore, was of the view that the declaration of dividend and p .....

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he directors were towards services rendered. He observed that when the Assessing Officer accepts the services rendered to the directors to be genuine, there is no reason to disallow the commission. The learned Commissioner (Appeals) relying upon certain decisions of the Hon'ble Delhi High Court in the case as referred to by him and a decision of the Tribunal, finally deleted the addition made by the Assessing Officer. Being aggrieved, the Department is in appeal before us. 9. We have conside .....

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