Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding


  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

TMI Blog

Home

2015 (12) TMI 1232

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... al in ITA No. 1674/Del/2011: 1. The CIT(A) erred in law and on facts in: a) Confirming disallowance of ₹ 10,76,828/- (5%) while allowing ₹ 2,04,59,739/- (95%) of the total commission of ₹ 2,15,36,567/- paid by accepting not only the services received and the agents. b) Confirming the said addition on ad-hoc estimated basis without pointing out any deficiency in the information and evidence submitted or in respect of any particular agent. c) Ignoring that once the services are proved then the quantum of payment for the said services is the sole discretion of the businessman. d) Thus, the ad-hoc disallowance of commission so confirmed on estimated basis ignoring the evidences placed on record should be deleted. 2. The appellant craves the leave to add, substitute, modify, delete or amend all or any ground of appeal either before or at the time of hearing. 2. The brief facts of the case are that the assessee is a company incorporated under the provision of Companies Act, 1956. It is engaged in the business of manufacturing and selling of off-set printing machines both in domestic market as well as in foreign market. The assessee-compa .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ales, the assessee booked an expense of ₹ 32,19,958/- and ₹ 1,93,14,967/- respectively as payment of commission. In the AY 2004-05, this expense was examined and after careful consideration and investigations, the entire expenses was disallowed being not spent for the 'purposes of business'. In the assessment proceedings assessee failed to produce any evidence in support of services rendered by the commission agents. The addition made on this account was confirmed by CIT(A)-XIX, New Delhi, vide order dated 20.08.2007 in Appeal No. 119/2006-07. The Hon'ble ITAT and Hon'ble High Court allowed the expenses on account of money paid to the commission agents. However, the department has decided to go on SLP against the order of Hon'ble High Court. In A.Y. 2005-06 2006-07, the matter has been decided by the Ld. CIT(A)-XIX, New Delhi by following the order of Hon'ble ITAT in A.Y. 2004-05. Since the nature of the commission in this year is more or less the same therefore to keep the issue alive the amount of money given by the assessee company to its commission agents is being disallowed and added to the income of the assessee which is being discussed i .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... lone does not enable the assessee to claim deduction. The Hon'ble Supreme Court in the case of Laxmi Narain Mandanlal Vs. CIT, 86 ITR 439, held as follows: The mere existence at an agreement between the assessee and its selling agents or payment of certain amount as commission, assuming there was such payment, does not bind Income Tax Officer to hold that the payment was made exclusively and wholly for the purpose of assessee's payments might have been made. It is still open to the Income Tax Officer to consider the relevant facts and determine for himself whether the commission set to have been paid to the selling agents or any part thereof is properly deductible under Section 37 of the Act. 8. Thus, the Assessing Officer is empowered to probe further and reache at a conclusion whether the commission was paid for the services actually rendered and determine whether the expenditure was laid out wholly and exclusively for the purpose of business. In the present case, the Assessing Officer had called upon the assessee company to furnish evidence in support of the services rendered by the commission agents. In response to this, vide its letter dated 23rd December, 20 .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... of commission as well as the aspect of rendering services by the commission agents were fully verifiable. However, neither the A.O. nor the learned CIT(A) made any attempt at their end to make probe into the matter for coming to the conclusion that the transactions were bogus, unfair and fraudulent. In our opinion, in the absence of any such material on record and in absence of any inquiry conducted to prove the non-genuineness of the transactions the departmental authorities were not justified in disallowing the claim of the assesee which was fully supported by the documentary evidence on record. 9. From the above, it is clear that the Hon'ble High Court had come to conclusion that the commission payment is allowable only because the Assessing Officer had not made any inquiry about whether the assessee had given full details of the commission payment as well as the aspect of rendering of services Whereas in the present assessment year the assessee company chosen not to file any evidence in respect of the services rendered by the commission agent. Therefore, the reliance placed by the learned Authorized Representative on the decision of the Hon'ble Delhi High Court is .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

Quick Updates:Latest Updates